Best of MFM: Listen To This Before You Invest Another Dollar

**SPEAKER_1** (0:00)
How would I take 10K and turn it into a million?

**Mohnish Pabrai** (0:02)
Circa 2025, we cannot go into the S&P. The S&P is overheated. So what I would do is I would treat Berkshire Hathaway as the index.

**SPEAKER_3** (0:10)
If you bought the S&P when the PE ratio was 23, your annualized return over the next 10 years was between 2 and minus 2 That's all you have to know.

**Mohnish Pabrai** (0:17)
Buffett's made at least 400 investment decisions. He's saying 12 are the ones that matter. The god of investing has a 4% hit rate.

**SPEAKER_4** (0:27)
Investing is an infinite game. You don't really win or lose. The players just decide to drop out. Don't be such a freaking idiot.

**SPEAKER_3** (0:33)
The riskiest thing in the world is the belief that there's no risk. When the time comes to buy, you won't want to.

**SPEAKER_1** (0:38)
If I said what's the number one trait that makes a great investor, what comes to mind? So let's play a game, you're my coach, you're my investing coach, let's say, and I have $10,000, and I want to turn it into a million, right? Podcast called My First Million, I want to go from 10K to a million, so that's 100X. How would I take 10K and turn it into a million?

**Mohnish Pabrai** (1:18)
The thing about investing is that opportunities are not going to show up just because you have the cash. So I would make some tweaks to your thinking first about the 10K. So I would say, okay, the 10K is a good starting point, but what I also want you to do separately from that is have a day job. Yeah. Okay. And I want you to spend less than your earning, and I want you to take the 10K, and I also want you to take your annual savings. Maybe that's five, ten thousand a year or whatever it is. And normally, I would say, put it into an index, right? The index, the S&P is overheated. We can't go there right now. Circa 2025, we cannot go into the S&P. Okay. Okay, maybe 2035 we can, but not 2025 So what I would do is I would treat Berkshire Hathaway as the index. So I would just say the default currently is you put it, you know, dollar cost average into the, into Berkshire Class B shares, right? And you keep doing that day in, day out. And if we did that, you know, the math is really simple. Even if we were doing 10% a year, right? I mean, which I think is pretty reasonable for Berkshire. Rule of 72, we would double every seven years. Life is all about doubles. Okay. Let's say we had a 20-something guy with 10,000, and you go for 50 years or 49 years. It's seven doubles. Right. Okay. Seven doubles is 128
Okay. It's 128 times your money. I gave you more than 100X.

**SPEAKER_1** (2:58)
Right.

**Mohnish Pabrai** (2:59)
I gave you 128X in 49 years.

**SPEAKER_1** (3:02)
Without having to be a genius.

**Mohnish Pabrai** (3:04)
Without doing anything. Right. So this is just plan B. Right. Where we put the 10,000 in, it becomes more than a million, 1.3 million, 3 million with no taxes paid. Right. There's no dividend, there's no taxes, there's nothing. And we haven't even gone to plan A yet.

**SPEAKER_5** (3:19)
Right.

**Mohnish Pabrai** (3:19)
This is just sitting there.

**SPEAKER_5** (3:21)
All right.

**SPEAKER_1** (3:22)
Let's take a quick break because we got a little freebie for you. So if you're listening to this episode and you like what Mohnish is talking about, you might be like me. You're trying to take notes. You're trying to remember these principles that he's talking about because the dude is just a wealth of knowledge when it comes to investing. Well, the fine folks at HubSpot listen to this episode. They took the transcript. They put down the nine principles that he talks about, as well as the examples that he have, and they put it all in a PDF for you. So you don't need to take notes. They did it all for you. You can read that, learn from it. That's a much better way to get more value out of these episodes. It's in the show notes below. Just go download that and enjoy.
So I want to ask about the S&P, because you don't know much about us, but the short version of the guy you see across from you there, Sam, is Sam's an entrepreneur. Sam builds his company. He sold his company, and he took the money that he made, and he said, look, I worked hard for this money. Now I want this money to work hard for me, but I need it to be safe. And so Sam went into a mostly, you know, best practice, low cost index funds in the S&P 500 And anytime I ask Sam about his strategy or I tell him, dude, you got to buy Bitcoin, Ethereum, you got to buy this, you got to put some money over here. Because I'm like, you know, if Sam is vanilla, I don't even know what I am. I'm some flavor off in the side that's strange.