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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Invest like Buffett? Date: 8/31/2011 10:21 AM
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http://finance.yahoo.com/news/Why-You-Cant-Invest-Like-usnew...

No, you cannot do it, and for obvious reasons: you do not have enough money.

You, too, could have invested in Goldman Sachs in 2008. But here's the difference between you and Buffett. If you had an extra $12,000, you could have purchased 100 shares of Goldman common stock at $120 a share. Considering that Goldman had been worth over $200 a share the year before, you might have thought you were getting a pretty good discount. You also would be receiving the Goldman dividend of $1.40 a share, a rate of just over 1 percent.

But Buffett had more than $12,000 to invest. He had $5 billion. So he negotiated a much better deal. He bought preferred stock that came with a special dividend. Instead of 1 percent, he negotiated a 10 percent dividend. So now every year he receives a check for $500 million. Then, only after he gets paid, do common stockholders get their paltry 1 percent.


So suppose you invested in Goldman stock when he did.

Goldman is selling at roughly $110 a share, slightly below its 2008 price. If you had invested with Buffett, you would have lost about $1,000. Buffett's lost some capital too, but he's collected $500 million a year in his special dividend.

There are also the examples of GE and BAC in the article.

Personally, I think that the reason that GE and Goldman have not done well since Buffett invested in them may be the very high interest rates that he was able to get. Will the same thing happen to BAC? I certainly would not buy that stock now.
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