Bill Gates'Portfolio.

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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