Matthew Schifrin - The Warren Buffetts Next Door: The Worlds Greatest Investors Youve Never Heard Of and What You Can Learn From Them

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Table of Contents

Additional Praise forThe Warren Buffetts Next Door

How real people make real money from stocks. Forget the Wall Street hype, read this!

Clem Chambers, CEOADVFN.com, Investorshub.com; Author of The Armageddon Trade and The Twain Maxim

Matt Schifrin has written an informative book, demonstrating a few of the many paths to investing success. In investing, as in many of lifes endeavors, passion, hard work, and discipline can outweigh theory and education.

Ron Muhlenkamp, Founder and President, Muhlenkamp & Company; Author of Rons Road to Wealth

To my mother Marcella,
whose warmth left us too soon,
and my father, Marvin,
who taught me to question everything.

To Susan, Noah, and Elisabeth,
who light up my life.

Foreword

Matt Schifrin has written one of the most unusualand usefulinvestment books you will ever find. Instead of trotting out some supposedly surefire formula on how to get rich, Matt has chronicled the successes of 10 individuals you have never heard of. He gives you unvarnished investment insights from people who mastered this arena on their own. Precisely because they are self-taught, their stories should have particular relevanceand inspirationfor millions of do-it-yourself investors. Several things pop out immediately:

There is no one way to achieve success. Each of these people has developed his own particular approach.

They do share two characteristics: hard work and iron discipline. They dont rely on tips from TV talking heads, friends, or acquaintances. They spend hours digging, and digging hard. They use the Web. While they take in reams of information from the Web and elsewhere, they make up their own minds.

Everyone likes to think he or she is disciplined. But most investors give in to their emotions when the market seems to be rising relentlessly or plunging sickeningly.

These next-door Buffetts make mistakesbut they actually learn from them.

Every one of them has suffered a searing market setback. Even investor John Navin, who had successfully avoided devastating losses during the 2008 and early 2009 market meltdown, missed the subsequent market upsurge.

Another thing that comes across loud and clear is the extraordinary phenomenon of the Web. It is truly empowering and liberating for individuals who didnt go to prestigious business schools or take formal courses in finance and security analysis. At the end of the book, Matt helpfully gives readers his take on web sites that do-it-yourself individuals can employ.

But most of these investors are employing the Web not just for facts, figures, ratings, and lists, but also for interacting with other individuals. In other words, the Internet allows constant brainstorming. You may be alone at your keyboard, but in terms of give-and-take, you could literally be at a stadium filled with other interested individuals.

What also becomes clear here is how the Web allows individuals, regardless of their circumstances, to develop talents that otherwise would have lain dormant. But while the Web is a great opportunity creator, it is no guarantor of success. It is a toola profoundly helpful onebut it is a means to an end.

Thus, the book both inspires and cautions. As always, there are no quick, easy roads to riches. But now people have unprecedented opportunities to create meaningful wealth over timeif they have stick-to-itiveness and the maturity to know there will be plenty of bumps along the way.

Steve Forbes

Acknowledgments

I would like to thank all the people who contributed to this book in many ways.

First and foremost I would like to thank Steve and Tim Forbes for encouraging my entrepreneurism as an editor. I also owe a great deal of thanks to my mentor and former editor, the late Jim Michaels. He set the bar high for Forbes reporters and inspired a generation of great financial journalists.

This book would not have been possible without a great deal of help from Ken Kam and his team at Marketocracy. Similar thanks are due to Adam Menzel and the crew at Ticker Technologies. I would also like to thank Barbara Strauch and my brother Andrew Schifrin for helping to get this project started. Thanks is also due to my friend Jason Zweig for helping me come up with the books name. I am also grateful for the support I got from Laura Walsh and Judy Howarth at John Wiley & Sons.

I would especially like to thank Tina Russo McCarthy, one of the unsung heroes at Forbes, who spent tireless hours in her spare time discussing this book with me and making sure that all of my is were dotted and ts crossed.

Last but not least, I would like to thank my family, Susan, Noah, and Elisabeth, for putting things on hold while I worked on this book, and for being a great sounding board for my ideas.

INTRODUCTION

Thou Shalt Covet Thy Neighbors Portfolio

In February 2000, at the peak of the bubble in dot-com stocks, I wrote a story in a special edition of Forbes magazine that had a provocative blurb on the cover posing the question: Will the Web Produce the Next Warren Buffett?

The article chronicled several amateur investors who were riding high during that raging bull market. One of them was a 47-year-old housewife who lived on a cattle ranch in Nebraska. After seeing her family nest egg languish in the high fee mutual funds that her broker had sold her, she went online to a site called ClearStation.com and taught herself about price-earnings multiples and moving averages. Another success story was a schoolteacher from Wisconsin, and yet another was a Vietnamese immigrant who worked for the phone company by day but trolled sites like Yahoo and Briefing.com for stock ideas at night.

A little more than a month later, the dot-com bubble burst and most of the tech stocks these amateurs had big profits in came crashing down. The party was over for these bull market heroes.

Or was it? There were five million online investors when I wrote that article. Today there are an estimated 50 million in the United States alone. I now think of the amateur online investors I profiled in February 2000 as merely an early wave in the gathering troops of self-directed investors. Todays online investors are equipped with great technology and a seemingly endless armament of information, tools, and online resources.

Some have made grand predictions of how the onslaught of self-taught investors will break down the walls protecting the mighty financial institutions that have dominated the financial landscape for a century. That investors are on a mission to free themselves from the yoke of high commissions and fees and middling advice. Could be, but I think individual investor goals are a lot less ambitious.

Self-directed investors are merely looking to improve their lot in life, to be able to afford to take a family vacation each year, to buy that lakefront house, or to send their kids to a good college. They want to ensure that they will have enough income to last them through retirement. Investors are beginning to realize that devoting time toward making your money work for you is a lot smarter than working for your money. After all, the tax code, which favors long-term capital gains and dividend income, encourages this behavior.

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