If this stock fell 99%, it still beat the S&P 500
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When my first son was born, I started putting his savings into the stock market. I wanted a hassle-free way for him. And the natural thing to do was buy the S&P 500 ETF. Today, I’ve stopped buying the index. What was once a simple and lazy way to invest has become dangerously expensive. And when the S&P 500 ETF stops behaving like an investment tool, it becomes a momentum machine. You might disagree… For long-term value, I prefer buying this instead. Since Warren Buffett took over the old textile company in 1965, Berkshire Hathaway has compounded an average 19.7% annually. Even if you had started investing in Berkshire Hathaway at different starting points, you would still have compounded a good double-digit returns. For example, if you’d started investing in Berkshire Hathaway, you’d get around 13.7% annualized returns between 2010-2024. Even if you started investing in 2000, that’s an annualized 10.3% return. That’s going through the global financial crisis, the COVID-19 pandemic and the more recent tech stock crash in 2022. Impressive. Credit: DividendTitan.com, *Period recorded between 2020 and 2024 Given the huge gain in Berkshire Hathaway shares, the stock could drop 99% and still be ahead of the S&P 500 since 1965… Credit: TradingView, DividendTitan.com, Berkshire Hathaway Annual Reports Here’s the thing: What I like is Berkshire Hathaway spreads its bets across sectors. Its top holdings include Apple, American Express, Coca-Cola, Alphabet, Bank of America and Chevron - some of America's most iconic businesses. On top of that, it owns private companies: a railway, an energy business and a large insurance operation. In a way, Warren Buffett's investment fund is like a proxy of the American economy. In my view, this is way better than simply owning an index whose performance is increasingly driven by tech stocks. Look, past performance is no guarantee of future returns. But if you're betting on the best US stocks, I’d still prefer to diversify my risk across different sectors. It's the simplest way to invest safely and profitably. In a market that’s getting more and more expensive, where the index concentration gets higher and higher, you'll know where I prefer putting my boys' money in. Disclaimer: I’m a shareholder of Berkshire Hathaway. Sometimes, investing can be simple. Willie Keng, CFA Founder, DividendTitan.com |
Dividend Titan
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