“No matter what I do, I don’t think it will be difficult to get rich with bank deposits…”
There are many investors who want to become rich by accumulating assets, but worry about not knowing where, how much, and how to invest. Is there an investment method that allows even beginners to increase their assets easily? This is the answer from Buffett Taro (バフェット太郎), a best-selling Japanese financial author and big-time investor.
“If you choose and invest in 8 to 10 high dividend blue chip stocks in the US that are continually multiplying, and reinvest the dividends received each year consistently, the principal will automatically increases through the compound interest effect.”
Buffett Tarot said, “It may sound like a common investment method, but it’s a shortcut to getting rich that I learned through trial and error. I’ve been making money this way since my 20s, and now at 41 years old, I am worth 600 million yen (about 5.3 billion won). ” he said.
Buffett Tarot is also an expert who appeared in the 2017 book of the Japanese magazine Nikkei Money (The Winners of the Japanese Stock Market) which reveals the practical secrets of 30 stock experts. It published in 2019 <미국 배당주 투자>has sold over 200,000 copies to date, making it an unprecedented success among investment books (a Korean translation was published in 2020). Ilbo’s 1st choice [왕개미연구소]interview Buffett Taro, an investment expert with 18 years of experience, via email.
Buffett Tarot does not want people around him to know that he has money, so his real name and face are not revealed. The caricature was drawn by a business cartoon expert at the publication of the book / Provided by Buffett Taro
– How did you accumulate assets of 600 million yen?
“I created my own ‘money machine’ where money creates money. We invested equally in 10 large US high dividend stocks such as Coca-Cola, Johnson & Johnson, and McDonald’s, with a 10% stake.<아래표 참고>. And when dividends came out, instead of withdrawing and spending them, I reinvested them back into the stock. Buying stocks with dividends like this is like getting them for free, so your mindset doesn’t fade. “If the stock price plummets and is cut in half, you don’t lose money.”
-Why do you only use American stocks?
“The Japanese stock market is a small market, accounting for less than 10% of global market capitalization. However, the US stock market accounts for half of the global market. Isn’t it natural for investors to invest mostly in American stocks? In the US, stocks with high barriers to entry, competitive advantage, and high operating margins are common enough to get kicked around. “There are more than 100 companies in the United States that have multiplied (increased dividends every year) for more than 30 consecutive years, but only one in Japan (Kao, Flower King).”
Graphics = Lee Min-kyung’s Chosun Design Lab
– Why not invest in the Japanese stock market?
“I currently do not own Japanese stocks. I have invested heavily in Japanese growth stocks that are said to have a promising future, but I have experienced only a bitter taste. As if testing my patience, I held on for a long time and made a profit, but I was lucky. The Japanese stock market has been strong lately, and I think it’s just down to the weak yen. “Given the stalemate in the Bank of Japan’s monetary policy, Japan does not appear to be a more attractive investment destination than the United States.”
✅ Dividend reinvestment yield gap 24 times
-In Korea, investing in US index ETFs is popular.
“Warren Buffett, god of investing, also recommends that the public invest in the S&P 500 Exchange Traded Fund (ETF), which includes the top 500 companies in the US market capitalization. However, the S&P 500 ETF is not a perfect financial product. Since the weighting method is based on market capitalization, large technology stocks with large market capitalization make up a high proportion of the index. Investing in an S&P 500 ETF ultimately means buying a relatively large number of overvalued stocks.”
Graphics = Chosun Design Lab Yujin Han
– Is that why you created the cash machine?
“There is no financial product that has no downsides in the first place. The money machine I designed includes 10 large dividend stocks in the United States that have been increasing their dividends for more than 25 years in a row. And when you receive dividends, you continue to reinvest in the lowest percentage of stocks (undervalued stocks) in your portfolio. “In a bear market, you can increase the number of stocks by investing dividends, and stocks acquired at a low price show their true value in a bull market.”
-Can even beginners do and operate it easily?
“Money machine portfolios can be created differently depending on the knowledge or risk tolerance of the investor. I created quite a few defensive stocks. All stocks are invested in the same proportion to maintain an overall balance. “No matter how undervalued or attractive the stocks looked, we didn’t buy more than we needed.”
-It’s so easy, but is it really a shortcut to getting rich?
“Think about going on a diet. Everyone knows that you can lose weight by eating a balanced diet and exercising regularly, but few people put it into practice. The world of investment is no exception. “Everyone knows how to make a money machine, but most people can’t resist and split the belly of the goose that lays the golden eggs.”
-Anyway, dividend reinvestment seems to be the key.
“If you look at long-term performance, the asset gap widens depending on whether dividends are reinvested or not. When ordinary people receive dividends, they either use it as pocket money or wait to buy it when a bear market comes, which can be a lost opportunity. I made sure to reinvest my dividends at the end of each month. Even during the coronavirus crisis in 2020, ExxonMobil (XOM) was consistently bought every month on principle, and later returned with a large profit. Of course, more people were selling at the time. According to Dr. Jeremy Siegel, if $1,000 was invested in US stocks in 1871, the difference in final assets with or without dividend reinvestment over 122 years was 24 times.”
Graphics = Lee Min-kyung’s Chosun Design Lab
– Which dividend stock should I choose?
“Instead of the stocks that people flock to, we should put on the list of candidates those that are simple and old-fashioned enough to elicit a reaction of, ‘Wow, that’s common…’. It is also important to check if the stock has increased dividends for more than 20 consecutive years even during the dot-com bubble of 2000 or the financial crisis of 2008. Even if the continuous increase performance is less than 20 years , it is fine as long as it is a stock that can pay dividends due to its high business competitiveness.”
– What should be the target rate of return?
“Based on the real rate of return excluding inflation, 6-7% is appropriate. 6-7% is the average rate of return of the market over the last 200 years and the average annual rate of return that can be expected in the future. If you save 500,000 won a month for 35 years and roll it over at 7% per year, you will accumulate money worth 900 million won. It is not necessary to have a large number of items, 8 to 16 items are appropriate. If you go into one stock, the risk becomes too high, and you can reduce the risk by increasing the number of stocks. “If the number of stocks is more than 20, the risk reduction effect becomes negligible.”
-Is the 600 million yen in assets all financial assets?
“I live in Nagoya, and I still live in the monthly rented apartment that I lived in since I worked in the company. I do not own real estate. I may live later. Investment information is distributed daily on note (a Japanese content platform), and the number of readers is 4,000 (980 yen per month).
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