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> over the last 20 years 20 years is an interesting time horizon for the NASDAQ -- it crashed in March 2000. If you go back 30 years you'll note that Berkshire

> over the last 20 years 20 years is an interesting time horizon for the NASDAQ -- it crashed in March 2000. If you go back 30 years you'll note that Berkshire actually outperformed NASDAQ by quite a bit.

TekMol 6y ago
Kinda true. For the NASDAQ, I get a 12.57% ROI over the last 30 years. It went from 372 to 12999. For Berkshire I get a 13.96% ROI over the last 30 years. It went from 6750 to 343525. So around 1.5% more for Buffet. Still a close call, when you think about that he is the symbol for a great investor and put his whole life into valuation research. Even if the average investor could reproduce this performance ... do they have the funds to make it worthwhile? The lesson might still be: Don't try to valuate stocks. It is not worth the time.
- mettamage 6y ago
  I'm taking this one from Graham's book. 72 / 12.57 ~= 5.73 72 / 13.96 ~= 5.16 72 / 8 = 9 These are rule of thumbs on how many years it'll take for your money to double if you have that rate consistently. So on a 40 year time horizon, one would get: 40 / 5.73 ~= 7 doubles 40 / 5.16 ~= 7.75 doubles Still way better than 4.44 doubles with 40/9 Hypothetical balances of 10K would be: 10000 * 2^7 = 1,280,000 10000 * 2^7.75 = 2,152,695 10000 * 2^4.44 = 217,056.7 Compound interest is one hell of a drug ;-)
- gabrielsroka 6y ago
  1.5%/yr compounded for 30 years is about 45% more. 1991 2021 ----- ------ NASDAQ $1,000 -> $34,627 BRK.A $1,000 -> $50,893 BTW, this is the same reason index funds can be so much better than mutual funds. If a mutual fund charges you a 1.5% fee per year and performs the same as an index fund over 30 years, the index fund will grow 45% more. Those fees really add up -- for them!
- enchiridion 6y ago
  Out of curiosity, is there a good way to control for the time window in situations like this?

TekMol 6y ago

Kinda true. For the NASDAQ, I get a 12.57% ROI over the last 30 years. It went from 372 to 12999. For Berkshire I get a 13.96% ROI over the last 30 years. It went from 6750 to 343525. So around 1.5% more for Buffet. Still a close call, when you think about that he is the symbol for a great investor and put his whole life into valuation research. Even if the average investor could reproduce this performance ... do they have the funds to make it worthwhile? The lesson might still be: Don't try to valuate stocks. It is not worth the time.

mettamage 6y ago
I'm taking this one from Graham's book. 72 / 12.57 ~= 5.73 72 / 13.96 ~= 5.16 72 / 8 = 9 These are rule of thumbs on how many years it'll take for your money to double if you have that rate consistently. So on a 40 year time horizon, one would get: 40 / 5.73 ~= 7 doubles 40 / 5.16 ~= 7.75 doubles Still way better than 4.44 doubles with 40/9 Hypothetical balances of 10K would be: 10000 * 2^7 = 1,280,000 10000 * 2^7.75 = 2,152,695 10000 * 2^4.44 = 217,056.7 Compound interest is one hell of a drug ;-)
gabrielsroka 6y ago
1.5%/yr compounded for 30 years is about 45% more. 1991 2021 ----- ------ NASDAQ $1,000 -> $34,627 BRK.A $1,000 -> $50,893 BTW, this is the same reason index funds can be so much better than mutual funds. If a mutual fund charges you a 1.5% fee per year and performs the same as an index fund over 30 years, the index fund will grow 45% more. Those fees really add up -- for them!
enchiridion 6y ago
Out of curiosity, is there a good way to control for the time window in situations like this?