A Lesson From Warren Buffett - Adviser Investments

Chart of the Week: A Lesson From Warren Buffett

Why can’t investors own the “consistently best-performing funds”? We certainly would if we could, but it’s far easier said than done. At Adviser Investments, we work incredibly hard to partner with managers who will outperform over time. However, expecting the managers we invest with (or any manager, really) to outperform the S&P 500 index year in and year out, well, that simply isn’t realistic.

To give one high-profile, non-mutual-fund example, consider Warren Buffett and his company, Berkshire Hathaway. Over the last 30 years, Berkshire Hathaway’s stock has gained 4,880%, or 13.9% per year. That’s miles ahead of Vanguard 500 Index fund’s 1,916% return, or 10.5% per annum. But if you look year by year, the stock only outperformed 20 times and trailed the index fund in 10 calendar years over that period. Said another way, Buffett outperformed the index fund by 3.4% a year over three decades while trailing once every three years.

Even the best managers trail the benchmarks from time to time.

Buffett Performance
Note: Chart shows calendar-year returns for Berkshire Hathaway’s class A shares minus the returns of Vanguard 500 Index from 1992 through 2021. When the bars are below zero, Berkshire Hathaway lagged 500 Index; when they are in positive territory, Berkshire Hathaway beat the index fund.
Sources: Morningstar, Adviser Investments.

This material is distributed for informational purposes only. The ideas and opinions contained herein  should not be viewed as recommendations or personal investment advice. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

For a summary of Adviser Investments’ advisory services and fiduciary responsibilities to our clients, please review our Form CRS here.

© 2022 Adviser Investments, LLC. All Rights Reserved.

Tags:

Chart of the WeekJeff DeMasooutperformanceportfolio manager