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Bill Gates'Portfolio.

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Bill Gates'
Portfolio.


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This article was posted on June 1, 1999.

Effective Diversification Calculation
Bill Gates' Portfolio
No. Security Current
Value
(V)
Relative
Value
(R)
Beta
(V x R)^2 Comments
1 VMMXX $23,000 0.2300 0.05 0.00013 Vanguard Money Market Fund
2 MSFT $77,000 0.7700 1.10 0.717409 Microsoft
- Total $100,000 1.0000 - 0.71754 = Sum(V x R)^2

Effective Diversification, D = 1/(SUM (V x R)^2) = 1/(0.71754) = 1.4

Non-market Risk = 1/(SQRT (D)) = 1/(SQRT 1.4) = 84.71%

100% Safe Withdrawal Rate = 0.63%

95% Safe Withdrawal Rate = 0.79%

90% Safe Withdrawal Rate = 0.86%

Note (1): Safe withdrawal rates based on 40 year pay out period.

Note (2): Bill Gates' actual portfolio reported in Fortune magazine in early 1999 contains about $4 billion in bonds, $1 billion in stock outside of Microsoft, and about one billion MSFT shares currently worth $80 billion. The 23% money market allocation in the example above was used to keep the stock/fixed income ratio the same as the other portfolios examined.


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Copyright 1999 John P. Greaney, All rights reserved.

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