The Intellectual Investor: Managing a Million: What Would I Do Differently?

Warren Buffett has famously said that managing a large portfolio is a challenge. The billions of dollars he controls can only be invested in the largest asset classes around. That’s because it takes billions to move the needle on the returns of a big pile of money.

But if the money were smaller, say a $1 million portfolio, Buffett says he could do better. He even states that he could earn 50% a year.

For most investors, $1 million would be an improvement on their current portfolio size. And the returns are nowhere near 50%.

As long as investors follow a disciplined approach, they can likely earn excellent returns. However, a 50% annualized goal may be a stretch. Even when Warren Buffett was working with small amounts of capital, he rarely saw a 50% return in a year.

What Buffett did do was follow a value-based investment strategy and stuck to it. And he avoided overly diversifying, at times having as much as 30% of his portfolio in a single investment.

Investors looking for bigger returns should also look to only invest in their top 10 ideas instead of 20. However, the risks of any single stock imploding and hitting a portfolio substantially rise.

Overall, investors looking for high returns have to take on higher risk. For investors with smaller portfolios, that’s easier than larger players.

To read the full analysis, click here.