Invest like a billionaire

There’s no stopping those ‘Wall Street types’ with the recent launch of the iBillionaire Index, the latest creation for investors looking for a way to ride on the coat tails of some of the world’s most recognised investors.

According to iBillionaire’s website, The iBillionaire Index (BILLION) is designed to track and measure the performance those who have, over time, reaped the biggest rewards on Wall Street: financial billionaires. The index monitors the portfolios of leading billionaire investors, such as Warren Buffett, Carl Icahn, Daniel Loeb, David Tepper and David Einhorn.”

While it would seem reasonable for investors to approach financial creations such as these with a healthy dose of scepticism, according to iBillionaire’s website the eight-year annualised performance of the index (hypothetical and back-tested) is 12.11% compared with a 4.6% return from the S&P 500 Index.

There are not too many billionaire investors in Australia with Mr Kerr Neilson, the founder of Platinum Asset Management (ASX: PTM) and Mr Kerry Stokes, the Executive Chairman of heavy equipment dealer and investment company Seven Group (ASX: SVW) standing out as two of the few who would meet the criteria of an equivalent Australian-focused iBillionaire Index.

However there are a number of listed companies Australian investors can purchase shares in which are run by founders who have amassed fortunes of over $1 billion — including Mr James Packer, the Executive Chairman of casino owner operator Crown Resorts (ASX: CWN); Mr Frank Lowy, chairman of global property firm Westfield Group (ASX: WDC); Mr Andrew Forrest, chairman of iron ore miner Fortescue Metals Group (ASX: FMG); and Mr Paul Ramsay, chairman of hospital owner and operator Ramsay Health Care (ASX: RHC).

Foolish takeaway

‘Imitation is the sincerest form of flattery’ as the saying goes. In investing there are no prizes for having an original idea – there are only prizes for having a profitable idea. As such there is nothing wrong with keeping an eye on what investors with a proven track record of outperforming the market are doing. However the intricacies of position sizing, portfolio management and error rates means a focus on any single idea that a ‘guru’ investor may have is unwise.

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