What’s Poppin’,

This is the Master Money Newsletter. The money newsletter that packs more heat than the ghost pepper wings you will eat during the super bowl.

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Here’s what we have on deck today:

• Learn about the Warren Buffett Portfolio.
• Read the latest news in less than 30 seconds.
• Watch the Best Fidelity Index Funds

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Numbers to Know

💳 U.S. credit card debt jumps 18.5% and hits a record $930.6 billion. In credit card debt? Check out our free debt course.

🥚Wholesale egg prices have dropped. We may see relief from the chicken that laid the golden egg soon.

🤮A recent Bankrate survey found the average American pays $24 a month (so $288/year!) for checking account fees! Switch to something like CIT Bank and pay no fees.

📈The FED announced an interest rate hike last week of .25%. Remember to pay off that high-interest debt. Especially if it is over 6%!

💻The monthly job report from the Bureau of Labor Statistics showed the US added 517,000 jobs in January.

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The Warren Buffett Portfolio

Uncle Warren Buffett is the single most influential person in my investing philosophy.

While true, this is also like saying Tiger Woods has the greatest influence on my golf game (as I shank my ball in the water and consistently shoot 100).

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The good news is, Warren also gave advice to people who are just trying to build wealth and focus on life (A.K.A you and me).

In fact, he invests his own wife's money in this exact portfolio. Today we are going to look at this portfolio and how it compares to our good friend The S&P 500.

Warren first mentioned this portfolio in his 2013 letter to shareholders. If you have never read his letters to shareholders they are a goldmine of investing wisdom. Here is what he said:

“In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th Century, the Dow Jones Industrials index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st Century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.”

He went on in his 2014 letter to shareholders:

“My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund (I suggest Vanguard‘s), Buffett stated in a 2014 letter to his shareholders. “I believe the trust’s long-term results from this policy will be superior to those attained by most investors—whether pension funds, institutions, or individuals—who employ high-fee managers.”

We just received portfolio advice from the world's greatest investor.

Today let’s break down this portfolio. We only need two funds and Uncle Warren suggests 2 from Vanguard:

• Vanguard 500 Index Admiral (VFIAX) - 90%
• Vanguard Total Bond Market Index Adm (VBTLX) - 10%

To model this out I am using one of my favorite tools Y-charts. It is pricey for the average person but they do have a 7-day free trial if you want to check them out (not an affiliate).

Let’s start with some of the important key metrics:

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Now, let’s see how it performed against the S&P 500:

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Returns over the last 20 years:

• Warren Buffett Portfolio: 9.81%
• The S&P 500: 10.44%

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This means over 30 years the 90/10 portfolio would grow to 1,988,454.96. With this outcome, you can draw down $79,538.16 per year in retirement according to the 4% rule.

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And for you chart lovers out there you can see how closely these two portfolios run:

This should be fairly obvious since the S&P 500 makes up 90% of this portfolio.

But what happens when we compare it to more conservative portfolios?

Well, a finance professor did just that. Javier Estrada of IESE Business School took a hypothetical $1,000 investment comprising of 90% stocks and 10% short-term Treasuries. Using historical returns, he tracked how the $1,000 would do over a series of overlapping 30-year time intervals. Beginning with the 1900–1929 period and ending with 1985–2014, he collected data on 86 intervals in all.

“What’s equally surprising is how this portfolio of 90% stocks fared during the five worst time periods since 1900. Estrada found that the nest egg was only slightly more depleted than a much more risk-averse 60% stock and 40% bond allocation.”

The reason you have a more conservative portfolio is to ride out the bad times. Yet, the 90/10 portfolio did very well compared to a 60/40. During good times, it crushed the returns of the 60/40.

Here are the results with a number of different portfolios.

The Warren Buffet Portfolio is one that most should consider when building out their asset allocation. Especially when you have a long time horizon.

To make it easy, I created a Warren Buffett Portfolio Pie in M1 Finance. You can check it out here! ​

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📈 Quick Tip Of The Week

If you have people who depend on your income (think of a spouse or children), you need life insurance. Term life insurance is the cheapest, and for most, it is all you need. I set my life insurance policy up with Policy Genius. It took me 30 minutes in total.

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High-Performance Book Club 📚

I get a ton of questions from listeners and readers as to what I am reading. So we decided to let you know via the newsletter. The High-Performance Book Club will be a way to share this. If you want to be Elite in your career, business, or with your wealth, then welcome to the club. If you would like to see our previous picks, you can find them here.

This weeks pick is:

​The Warren Buffett Way ​

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The Personal Finance Podcast 🎙️ ​ ​

​6 Ways to Access Your Retirement Funds Early with Jeremy Schneider (From Personal Finance Club!)​

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Youtube

​6 Best Fidelity Index Funds to Hold Forever (High Growth!)​

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