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People have been calling tech "overvalued" since 2005. Its a misnomer, and everyone who has used that as in investment philosophy has lost tons of money. Tech i

People have been calling tech "overvalued" since 2005. Its a misnomer, and everyone who has used that as in investment philosophy has lost tons of money. Tech is here to stay, and as an investment, offers significantly more leverage than elsewhere. Tech is twice as valuable relative to other investments. You dont understand how markets work Buffet is an old out of touch man, who got rich buying the hot stocks of his day. He has lagged the market for 15 years

HPsquared 6y ago
To quote Keynes, "markets can remain irrational longer than you can stay solvent"
- n_io 6y ago
  Great quote
function_seven 6y ago
EDIT: Apparently I'm out of my depth here. Leaving my comment below for posterity. > He has lagged the market for 15 years Here's Berkshire's performance compared to the S&P500, over the last 20 years: https://imgur.com/Ssfon56 https://imgur.com/Ssfon56 S&P doubled your money, BRK quintupled it.
- smabie 6y ago
  Your chart is incorrect. With split and dividend adjustments, the returns are almost identical from 2002 onwards (I don't have personal data before 2002). 2002 to date, BRK had a 8% annualized return and the S&P 500 has a 7.8% return. However, BRK has a lower Sharpe ratio (0.38) than the S&P 500 (0.4). So in a real sense, SPY has outperformed BRK. That's not to say that an investment in BRK is irrational, the beta is low (0.71) and the correlation to the market is low as well (0.65). You can't just naively compare some price chart, finance doesn't work like that. Source: I work as a quant
  - function_seven 6y ago
    Thanks. I should have listened to the small voice in my head before posting that. So while BRK isn't crushing the index, would it be fair to say it "lagged" the market over the past 15 years? Seems pretty close, but I don't have the knowhow to analyze that time period with dividend reinvestment thrown into the mix. Though I've always thought these charts account for splits, no?
    - smabie 6y ago
      No I definitely wouldn't say it lagged the market. While BRK isn't "crushing it", it's done a pretty good job considering the high concentration of positions and low diversification. It's clear that Buffet has been delivering significant alpha over the 21st century. Due to the low correlation with the market, BRK can be seen as a great way to diversify away market risk and increase the risk-adjusted returns of a S&P 500+BRK portfolio. Or in other words, it's a totally solid investment. Price charts don't account for dividends because people would get confused why the actual price you pay for something is different than the price on the chart. Edit: sorry if I sounded harsh in my previous comment, I'm a little anal about these things as I see a lot of financial misinformation on HN.
imtringued 6y ago
If you knew anything about stocks then the people who performed the worst are usually falling into the trap of buying "hot stocks". Inexperienced investors buy stocks that have gone up recently and then get disappointed when they eventually go down. Essentially they commit the mistake of buying high and selling low. The "age-old" strategy is to buy "cold" under-performing stocks whose company has growth potential. Today people just buy "hot" stocks and make bank because the central bank is also buying them.
- logicslave 6y ago
  This is 100% wrong. If you jumped on the hot stocks, aka FAANG, in the last decade, most likely you are near retirement. This continues to be true.

HPsquared 6y ago

To quote Keynes, "markets can remain irrational longer than you can stay solvent"

n_io 6y ago
Great quote

function_seven 6y ago

EDIT: Apparently I'm out of my depth here. Leaving my comment below for posterity. > He has lagged the market for 15 years Here's Berkshire's performance compared to the S&P500, over the last 20 years: https://imgur.com/Ssfon56 https://imgur.com/Ssfon56 S&P doubled your money, BRK quintupled it.

smabie 6y ago
Your chart is incorrect. With split and dividend adjustments, the returns are almost identical from 2002 onwards (I don't have personal data before 2002). 2002 to date, BRK had a 8% annualized return and the S&P 500 has a 7.8% return. However, BRK has a lower Sharpe ratio (0.38) than the S&P 500 (0.4). So in a real sense, SPY has outperformed BRK. That's not to say that an investment in BRK is irrational, the beta is low (0.71) and the correlation to the market is low as well (0.65). You can't just naively compare some price chart, finance doesn't work like that. Source: I work as a quant
- function_seven 6y ago
  Thanks. I should have listened to the small voice in my head before posting that. So while BRK isn't crushing the index, would it be fair to say it "lagged" the market over the past 15 years? Seems pretty close, but I don't have the knowhow to analyze that time period with dividend reinvestment thrown into the mix. Though I've always thought these charts account for splits, no?
  - smabie 6y ago
    No I definitely wouldn't say it lagged the market. While BRK isn't "crushing it", it's done a pretty good job considering the high concentration of positions and low diversification. It's clear that Buffet has been delivering significant alpha over the 21st century. Due to the low correlation with the market, BRK can be seen as a great way to diversify away market risk and increase the risk-adjusted returns of a S&P 500+BRK portfolio. Or in other words, it's a totally solid investment. Price charts don't account for dividends because people would get confused why the actual price you pay for something is different than the price on the chart. Edit: sorry if I sounded harsh in my previous comment, I'm a little anal about these things as I see a lot of financial misinformation on HN.

imtringued 6y ago

If you knew anything about stocks then the people who performed the worst are usually falling into the trap of buying "hot stocks". Inexperienced investors buy stocks that have gone up recently and then get disappointed when they eventually go down. Essentially they commit the mistake of buying high and selling low. The "age-old" strategy is to buy "cold" under-performing stocks whose company has growth potential. Today people just buy "hot" stocks and make bank because the central bank is also buying them.

logicslave 6y ago
This is 100% wrong. If you jumped on the hot stocks, aka FAANG, in the last decade, most likely you are near retirement. This continues to be true.