Book Review > The Warren Buffett Portfolio

Although the author of this book is a professional fund manager (just like Warren Buffett), it's just a basic primer & a fairly easy read.

Written as a companion piece to an earlier work "The Warren Buffett Way" (which I haven't read & so can't comment on how well they fit together), it's divided into two major segments with an introduction & conclusion.

The first part deals with "focus investing" & how this type of professional investor concentrates on the actual business, its' management & potential for growth rather than the share price on any given day. New research is presented in favor of small portfolios as opposed to diversified portfolios. The main thrust of the argument being that the more diversified the portfolio the more it resembles the market index - S&P500, Dow Jones or ASX Industrial - which will possibly match the market but not beat it. On the other hand, the author says that by focusing on a small number of excellent companies the intelligent investor can beat the market over the long haul. He then goes on to illustrate his point with a selection of successful "focus" investors.

The second major segment deals with the mathematics of investing, investment psychology, turnover & the effect that brokerage fees & capital gains tax have on returns. An interesting new field of study - "complex adaptive systems" is introduced.

This attempts to explain why nothing is ever the same again & why it is futile to try to predict the future from past events in a complex system such as the national economy or the share market.

I particularly enjoyed the analysis of the "focus" verses the diversified portfolios & the discussion on "complex adaptive systems".

As the author says, focus investing is not for everyone & I'm sure this book is capable of generating a lot of argument both for & against.