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As a huge fan of Buffett, I must point to the fact that can materially change this comparison in the years to come: - stock market returns were abnormally high

As a huge fan of Buffett, I must point to the fact that can materially change this comparison in the years to come: - stock market returns were abnormally high for the past 15 years - Berkshire is sitting on a huge pile of cash, ready to invest This is a very similar scenario to what people were saying in 1999 - Buffett is done etc. I highly recommend reading his biography - "The Snowball" and especially the preface when they describe the speech he gave in 1999, about stock market levels and valuations. Mind blowing, knowing what happened later.

WheelsAtLarge 3y ago
I would also add that the portfolio he manages is over 350 billion. That's a huge chunk of money to invest. The number of places where he can invest without overpowering the investment is very limited. He's mostly left with big companies that aren't growing as fast as the rest of the market. That's my guess.
- RishitJain 3y ago
  Exactly.
RishitJain 3y ago
Huge fan of Buffett myself. Of course, BRK could outperform SPX in the years to come, but the probability is stacked against it. The larger and more diversified the company becomes, the more its returns start mirroring the broader market.
goodbyesf 3y ago
> As a huge fan of Buffett, I must point to the fact that can materially change this comparison in the years to come: The beauty of financial 'journalism'. They choose arbitrary points of comparison to fit whatever they are trying to 'sell'. Wonder why 20 years and not the past 21 years or 25 years or 30 years? > - stock market returns were abnormally high for the past 15 years Which was expected since we had QE and low rates for much of the past 15 years. > Mind blowing, knowing what happened later. Sure. He also said everyone should buy when the markets were collapsing in 2008 ( aka when there is blood on the streets ). And that was great advice as well. But Buffet's problem is that he discounts tech. He famously chose not to invest in microsoft because he didn't understand software and technology.
- RishitJain 3y ago
  Nothing to sell. Just making the point that active investing is hard.
- habitue 3y ago
  Buffett has a huge investment in apple. The tech comment is outdated
  - xbmcuser 3y ago
    Despite that he is still underinvested in tech looking at how big a portion tech is now of the S&P 500. Mostly because he does not understand it if he did according to his own rules he would have even larger investments in tech.
    - shapefrog 3y ago
      Apple stock currently represents nearly 40% of Berkshire Hathaway's equity holdings.
    - rewmie 3y ago
      > Mostly because he does not understand it (...) What leads you to believe that he doesn't understand it? I mean, how many tech companies failed/are failing badly? It's easy to single out Microsoft as an example of a success story, but it's even easier to pick failure stories. Perhaps Warren Buffet does well smelling out those?
      - shapefrog 3y ago
        > What leads you to believe that he doesn't understand it? People dont understand the subtle art of language. I, on the other hand, have always assumed that Buffett made the "I don't understand" remark with typical self-deprecating-but-knowing Buffett charm — as in, "All you people piling into dot-com stocks must be much smarter than I am, because I just don't get it!" In other words, I believe that, in typical Buffett fashion, Buffett understood everything he needed to understand about technology in the late 1990s, which is that technology investors had gone stark raving mad. https://www.businessinsider.com/why-buffett-doesnt-invest-in-technology-2014-3?r=US&IR=T https://www.businessinsider.com/why-buffett-doesnt-invest-in...
GrumpyNl 3y ago
Impressive but still he has under performed.
refurb 3y ago
I’m not sure either of statements really excuses the underperformance. You either beat the market or you don’t. It’s relative. He could lose money but if he loses less than the broad market, he outperformed. And sitting on a pile of cash is a negative, a lost opportunity. That said 20 years is arbitrary, however it’s not an insignificant period of time. It’s two decades! But my final point is that Buffet isn’t an investor in the way regular people are. He doesn’t passively put his money into companies. He often buys controlling stakes in a company - either taking them over entirely or getting a board set where he can change the way the company operates. Comparing BH return with your average Joe is like comparing a casual gambler with one who does it professionally and often find edges nobody else has.
- RishitJain 3y ago
  As always, Buffett said it best, "By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals." More here: https://monevator.com/warren-buffett-passive-investing https://monevator.com/warren-buffett-passive-investing
- adammarples 3y ago
  When making a comparison like that, the endpoints really matter. How many of the last 20 years has he been beating the market? And the next 10? Today is at an extreme in valuations and of course everyone who is betting on a fall will look bad until suddenly they don't. It's currently not possible to say whether sitting on cash is stupid or wise, the next few years will bear that out one way or another.
  - refurb 3y ago
    The next 10? I don't know, I can't predict the future. And finding out 10 years from now he didn't beat the market for 30 years, is half a lifetime of investing (most of your adult life). Not like you can go back and fix that. It's 20 years of failing to beat a simple "invest in indexes and forget it". So basically an adult who followed index investing for the last 20 years can say "I have higher returns than Buffet".

WheelsAtLarge 3y ago

I would also add that the portfolio he manages is over 350 billion. That's a huge chunk of money to invest. The number of places where he can invest without overpowering the investment is very limited. He's mostly left with big companies that aren't growing as fast as the rest of the market. That's my guess.

RishitJain 3y ago
Exactly.

RishitJain 3y ago

Huge fan of Buffett myself. Of course, BRK could outperform SPX in the years to come, but the probability is stacked against it. The larger and more diversified the company becomes, the more its returns start mirroring the broader market.

goodbyesf 3y ago

> As a huge fan of Buffett, I must point to the fact that can materially change this comparison in the years to come: The beauty of financial 'journalism'. They choose arbitrary points of comparison to fit whatever they are trying to 'sell'. Wonder why 20 years and not the past 21 years or 25 years or 30 years? > - stock market returns were abnormally high for the past 15 years Which was expected since we had QE and low rates for much of the past 15 years. > Mind blowing, knowing what happened later. Sure. He also said everyone should buy when the markets were collapsing in 2008 ( aka when there is blood on the streets ). And that was great advice as well. But Buffet's problem is that he discounts tech. He famously chose not to invest in microsoft because he didn't understand software and technology.

RishitJain 3y ago
Nothing to sell. Just making the point that active investing is hard.
habitue 3y ago
Buffett has a huge investment in apple. The tech comment is outdated
- xbmcuser 3y ago
  Despite that he is still underinvested in tech looking at how big a portion tech is now of the S&P 500. Mostly because he does not understand it if he did according to his own rules he would have even larger investments in tech.
  - shapefrog 3y ago
    Apple stock currently represents nearly 40% of Berkshire Hathaway's equity holdings.
  - rewmie 3y ago
    > Mostly because he does not understand it (...) What leads you to believe that he doesn't understand it? I mean, how many tech companies failed/are failing badly? It's easy to single out Microsoft as an example of a success story, but it's even easier to pick failure stories. Perhaps Warren Buffet does well smelling out those?
    - shapefrog 3y ago
      > What leads you to believe that he doesn't understand it? People dont understand the subtle art of language. I, on the other hand, have always assumed that Buffett made the "I don't understand" remark with typical self-deprecating-but-knowing Buffett charm — as in, "All you people piling into dot-com stocks must be much smarter than I am, because I just don't get it!" In other words, I believe that, in typical Buffett fashion, Buffett understood everything he needed to understand about technology in the late 1990s, which is that technology investors had gone stark raving mad. https://www.businessinsider.com/why-buffett-doesnt-invest-in-technology-2014-3?r=US&IR=T https://www.businessinsider.com/why-buffett-doesnt-invest-in...

GrumpyNl 3y ago

Impressive but still he has under performed.

refurb 3y ago

I’m not sure either of statements really excuses the underperformance. You either beat the market or you don’t. It’s relative. He could lose money but if he loses less than the broad market, he outperformed. And sitting on a pile of cash is a negative, a lost opportunity. That said 20 years is arbitrary, however it’s not an insignificant period of time. It’s two decades! But my final point is that Buffet isn’t an investor in the way regular people are. He doesn’t passively put his money into companies. He often buys controlling stakes in a company - either taking them over entirely or getting a board set where he can change the way the company operates. Comparing BH return with your average Joe is like comparing a casual gambler with one who does it professionally and often find edges nobody else has.

RishitJain 3y ago
As always, Buffett said it best, "By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals." More here: https://monevator.com/warren-buffett-passive-investing https://monevator.com/warren-buffett-passive-investing
adammarples 3y ago
When making a comparison like that, the endpoints really matter. How many of the last 20 years has he been beating the market? And the next 10? Today is at an extreme in valuations and of course everyone who is betting on a fall will look bad until suddenly they don't. It's currently not possible to say whether sitting on cash is stupid or wise, the next few years will bear that out one way or another.
- refurb 3y ago
  The next 10? I don't know, I can't predict the future. And finding out 10 years from now he didn't beat the market for 30 years, is half a lifetime of investing (most of your adult life). Not like you can go back and fix that. It's 20 years of failing to beat a simple "invest in indexes and forget it". So basically an adult who followed index investing for the last 20 years can say "I have higher returns than Buffet".