.HowardRGold with strong words: Investors should no longer bet on Warren Buffett
When Warren Buffett’s annual letter to Berkshire Hathaway shareholders was published last weekend, media coverage focused on the chairman and CEO’s mea culpaabout Berkshire’s investment in Kraft Heinz KHC, -2.08% his lament that he couldn’t find the next big investment to buy, the accounting change that caused Berkshire to take a $20-billion write-down, and, once again, his failure to announce any formal succession plans even though Buffett is 88 years old and Vice Chairman Charlie Munger is 95.
Humility aside, that’s quite an admission: Warren Buffett, the greatest investor in history, is saying that neither he nor his best handpicked stock-picking talent has achieved the essential goal of active money management — beating a boring old index fund any schlemiel can buy in his or her 401. Read: Warren Buffett reminisces about buying first stock at 11 — ‘I had become a capitalist, and it felt good’
That’s why we shouldn’t be surprised by Buffett’s own favorable comments about index funds. “If my [initial] $114.75 had been invested in a no-fee S&P 500 index fund [in 1942], and all dividends had been reinvested, my stake would have grown to be worth $606,811 on January 31, 2019,” he wrote in the annual letter. “That is a gain of 5,288 for 1.” He said on CNBC that $10,000 invested in an index fund in 1942 would be worth $51 million today.
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