Buffett's investment returns

Source: Daoshuo Blockchain

In the comment area of ​​yesterday's article, a reader mentioned a data that has been hotly discussed by many financial media recently:

In the past 20 years, Buffett's average return rate is not as good as the S&P 500 index.

This data was quite surprising when it was first released. But when we dig deeper, we will find that there are many details behind this unexpected data that are worth our consideration.

First of all, the return rate here actually refers to the return rate of Buffett's entire team rather than the return rate of Buffett's own investment.

In the early years, in order to avoid the surprises that the well-known natural laws may bring to the company, the two old gentlemen Buffett and Munger gradually handed over more and more businesses to their successor teams for management.

The successor team performed quite well in the early stage of taking over, and its performance once exceeded that of the two founders. But the good times did not last long. Since then, the performance of the successor team is no longer brilliant. Not only did it not surpass the two old gentlemen, but it also lagged behind the S&P for a long time. And the two old gentlemen still maintain a brilliant record.

After this data was first exposed by the US financial community, many people were worried about where Berkshire Hathaway would go once the two old gentlemen were no longer in charge of this huge empire.

There was such a scene at this shareholders' meeting:

Ajit Jain, one of the two successors, shouted to the audience:

"No one is irreplaceable. I believe that we have Tim Cook in the audience, who has proved this and set an example for many followers."

To be honest, I am very cautious about this statement.

In addition to team reasons, there are other reasons that can also partially explain why Berkshire Hathaway's rate of return began to decline.

Dan Bin, a well-known private equity manager in my country, explained this phenomenon well in a recent interview:

One of the reasons is that the locomotive leading the US stock index has undergone tremendous changes. Now the companies leading the S&P index are those technology giants. And the technology industry is an area that Buffett rarely touches. In this case, it will become increasingly difficult to outperform the S&P 500 by investing in traditional fields that Buffett is good at.

Munger has mentioned this point many times in his speech at the shareholders' meeting. He said that the current investment market is no longer like when they were young, and they can find good targets with a little search. Now investment is becoming more and more difficult.

Besides, Berkshire Hathaway is getting bigger and bigger. It is a huge challenge for them to maintain a higher rate of return than the index with such a large scale.

In order to meet such challenges, investing in Apple is an attempt by the two old gentlemen.

When answering a shareholder's question about investing in Apple stock, Munger said: The reason why the company began to try to invest in Apple was forced by the times.

In the case of increasingly difficult investment, if you still want to find a higher rate of return, you must try new breakthroughs and new fields. So, they chose Apple.

Munger also mentioned that when they first invested in Apple, they were not so sure, and they also explored while doing it, and they came all the way.

From this phenomenon and these details, we can also see that it is not easy to obtain long-term and stable returns that exceed the index in the stock market.

Therefore, the two old gentlemen repeatedly emphasized on many occasions: For ordinary investors who do not have time to study companies, the best way to invest in the stock market is to invest in index funds.

It’s just that most people want to get rich overnight, and are not willing to get rich slowly.