Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
berkshirehathaway.com
Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
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Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#2There's going to be a day where there won't be any more annual letters from him.
Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#3There's going to be a day where there won't be any more annual letters from him.
Yes. But why do you want that? Why the need to state this at the moment?
Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#4"In Berkshire’s 2005 annual report, I argued that active investment
management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund. ”
He then goes on to show how that's been true, and that a standard index fund outperforms almost every hedge funds even before extra fees to the hedge funds are taken into account.
It's not the first time this has been pointed out, and it suggests that for non-multimillionaires, an index fund is always the most rational choice.
You get close to the return you'd get by investing in real estate, with the added benefit of index funds being much more easily liquifiable.
Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#5The transparency and humble tone is pretty unique.
"Unfortunately, I followed the GEICO purchase by foolishly using Berkshire stock"
"It was, nevertheless, a terrible mistake on my part"
"Despite that cautious approach, I made one particularly egregious error"
I bet you don't find that sort of thing in many other annual shareholder letters.
Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#6There's going to be a day where there won't be any more annual letters from him.
Until someone makes an AI Buffett simulator.
Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#7The transparency and humble tone is pretty unique. "Unfortunately, I followed the GEICO purchase by foolishly using Berkshire stock" " It was, nevertheless, a terrible mistake on my part" "Despite that cautious approach, I made one particularly egregious error" I bet you don't find that sort of thing in many other annual shareholder letters.
Sure, but it's easy to be humble when you're essentially an institution. In fact, it's better that way, because it appears honest. It's far harder for an unproven fund manager to admit making egregious mistakes without making his shareholders nervous. Buffett has 50 years of beating the market to soothe stakeholder concerns. Most other managers don't.
Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#8Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#9"In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund. ” He…
>> You get close to the return you'd get by investing in real estate
Close to the return on unleveraged real estate investing. Most real estate investing is significantly leveraged, to a larger extent than possible (or recommended) for stock market investing.
Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]
#10"In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund. ” He…
Hedge funds make perfect sense for people who want to hedge their capital in specific ways. A hedge fund doesn't need to outperform the market to deliver tremendous value to their customers.
Secondly, every trade has a counterparty. So somebody necessarily has to be at the loser's end of every trade. For every investment fund that makes oversize profits another fund loses money. It all evens out. That doesn't mean it's entirely zero sum, though, because money still flows from bad businesses towards good businesses as a result. The incentives for professional money managers are also totally misaligned: funds performance is reported quarterly leading to a short term bias; fund managers get a bonus if they invest irresponsibly but get lucky; customers are unsophisticated so it's one big lemon market.
I agree that index funds make a lot of sense for non-millionaires (and single digit millionaires), but that's simply because it takes a lot of effort to beat the market even by a few percent so you need a lot of assets for it to be worthwhile.