Warren Buffett:

Even the Great Find it Tough Sometimes

Market Volatility

You may have heard of Warren Buffett, often referred to as the greatest investor of all time. In financial circles, he has been called The Oracle of Omaha relating to his standing (from Omaha – Nebraska – US) in the investment world. This is essentially through his company Berkshire Hathaway listed on the US Stock Exchange. One of the most incredible stock stories.

It is interesting to compare this particular share/company over the last 20 years (and 10 years as well) with the broad US share market being the S & P 500 Total Return Index (a spread across America’s top 500 companies). This table illustrates how Buffett’s company has tracked compared to the S & P 500.

This confirms that it is hard to beat the broad market returns, especially consistently over long periods (10 years or more). Even the GREAT find it difficult to outperform at times.

The intention of this article is not to knock a champion, as for over 6 decades Warren Buffett has amassed a fortune for himself and his believers.

The reason for the relative “lesser than what we would expect” performance would be a number of answers, but no doubt that Berkshire Hathaway had lesser exposure to some of the internet growth stocks over the past 10 years. This may have contributed to some of the numbers not shooting the lights out, so to speak. Who is to argue with Warren Buffett?

The main take from this article is that in the long term, if you can get on average 9% to 10% per annum (income and growth) from a well-diversified share portfolio, that is a good result. Getting 18% or 20% per annum total returns regularly over the long term is just not there.

With so many Exchange Traded Funds (ETF’s) available that relate to exposure to broad markets around the World, then these type of “match the market” investments have a place in our portfolios whether Ordinary investments, Superannuation Fund investments or Account Based Pension investments.

At Plus1, we are available at any time to discuss issues of this nature, with due regard to your investments or financial planning generally.

Matt O’Bryan

Email: Wealth Advisors  

Phone: (03) 5833 3000

Rod McElroy

Email: Rod 

Phone: (03) 5833 3000

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