Bernie Madoff has died in prison, remembered not as the “investor” who churned out a monthly +1% without fail, but as the world’s greatest fraudster “losing” investors $65bn.
He lived a life of lies, turned in by his sons, one of whom died by suicide two years later.
A tragic story on a personal & financial level.
But let’s learn from the mistakes of others.
How did he amass $65bn?
Investors were lured in by the “consistent” historic returns & low volatility. Aside from a bank account, we know these don’t co-exist – volatility is the price you pay for return.
Families were wiped out as they increasingly concentrated their bets in Madoff Securities thinking they’d found the “Holy grail.”
When they should have been diversifying as their wealth increased.
Berkshire Hathaway was originally a textile manufacturing company but we only know who Warren B is because he retained his wealth.
Which he’s done by adding new investments every year, increasing his level of diversification as his wealth grew.
Now look at your own portfolios.
How concentrated are you in a single: country, style, fund & security?
And don’t justify your position using the “C” word.
Madoff’s investors also had “Conviction”.