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by maria2 1270 days ago
Warren Buffet is not betting on index funds. If he was, Berkshire Hathaway would not exist. Buffet uses index funds to manage some of Berkshire’s money, and he famously bet a meager sum (for him) that actively managed funds wouldn’t beat the S&P, but if you look at what Berkshire does, then you would see they are still very much into active management. The success of Berkshire should really prove to everyone that it’s possible to beat the market. Will most beat the market? No. But it’s obviously possible if you have the talent.
2 comments
chii 1270 days ago
> should really prove to everyone that it’s possible to beat the market

none of the bogglehead investment advice claim that it's not possible to beat the market - the claim is that it's hard, and if you're average person (and face it, most people are average people), the best advice is to do what is more likely to succeed, rather than the small chance thing that might succeed beyond your wildest dreams.

Therefore, the best advice for the average person is to buy index funds, rather than follow the path of Buffet.

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lotsofpulp 1270 days ago
> The success of Berkshire should really prove to everyone that it’s possible to beat the market.

Since 2008, BRK is just keeping up with SP500, and even that seems to be due to outsized bets on Apple, which offset earlier mistakes of not investing in Apple, Microsoft, Alphabet, Amazon…and instead going with IBM/Heinz.

That is a lot of risk for no gain over 15 years. Obviously, Buffett is playing with money he can afford to lose, but he is smart enough to advise others who cannot afford to lose to invest differently.

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maria2 1270 days ago
Are you sure? Just some back of the napkin math: S&P 500 is 5.17 times higher since the bottom of 08. BRKB is 6 times higher. And performance this year is even more dramatic. S&P is down 20%. BRKB is up 3%. In 08, too, the decline in Berkshire was much less than the S&P. Clearly Berkshire has been a better bet at most points in time.
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lotsofpulp 1270 days ago
December 2008 to Dec 2022, I am getting SP500 at 13.5% and BRK-B at 12%:

https://dqydj.com/sp-500-return-calculator/

https://dqydj.com/stock-return-calculator/

Dec 2007 to Dec 2022 is 8.86% for SP500 vs 7.99% for BRK-B.

Dec 1997 is 7.7% for SP500 vs 10.57% for BRK-B.

BRK even provides this information by year in their annual report on page 2, and the all time record is BRK at 20% versus SP500 at 10%:

https://www.berkshirehathaway.com/letters/2021ltr.pdf?mod=ar...

Of course, I should not debate that it is possible to beat the market, but the question for an individual is, is the potential return over the relatively risk-less SP500 worth the risk? And the data for the past 14 years or so indicates that BRK’s edge may have decreased.

I write “relatively risk-less SP500” because on a sufficiently long timeline, I assume US federal government is bailing out SP500, or the US federal government has big problems (such as does not exist in the form it is in now).

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