BRK.B

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Bernard
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BRK.B

Post by Bernard » Tue Nov 12, 2019 5:10 pm

Years before I discovered the FIRE movement and low cost index funds, I invested all my money in individual stocks. Some were winners, some losers. A few years ago, after seeing the light, I started selling those stocks whenever they experienced a spike and invested the money in VTI, VOO, and VGT instead.

I still own 11 individual stocks, of which about half are real losers that went down in value between 40 and 90 percent, and the other half are winners that have tripled and quadrupled in value.

And then I have a truck load of BRK.B in my Roth IRAs, which I started buying about 8 years ago. They've done okay, but not remarkable compared to, say Amazon or Netflix. I'm a big Buffet fan and feel that BRK.B is as conservative as it gets when it comes to individual stocks, but Berkshire doesn't pay any dividends, and it seems like they can't really outperform the market anymore either. So I'm consider selling them all and investing the money in Vanguard instead.

What are your thoughts?

Olemiss540
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Re: BRK.B

Post by Olemiss540 » Tue Nov 12, 2019 5:17 pm

Simplify. Dont take on undue/uncompensated risk due to a bias towards stock picking versus picking the whole haystack.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

GetRichQuick
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Re: BRK.B

Post by GetRichQuick » Tue Nov 12, 2019 5:23 pm

If you have any stock in an IRA (such as your BRK.B) - I would definitely sell it and reinvest per your asset allocation. You have no tax consequences for doing so. Also, stop reinvesting dividends and invest the proceeds per your asset allocation.

If you have stock in taxable accounts, I would sell all of the losers and enough winners to offset the loss. After that, I would sell the winners based on your willingness to pay taxes balanced with your desire to take on increased risk.

Good luck!

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arcticpineapplecorp.
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Re: BRK.B

Post by arcticpineapplecorp. » Tue Nov 12, 2019 5:24 pm

the beauty of owning the market is that you will still own brk.b, but now in the proportion it makes up of the total market. So you can have your cake and eat it too (and take less risk).

tax loss harvest as getrichquick noted:
https://www.bogleheads.org/wiki/Tax_loss_harvesting
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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1789
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Re: BRK.B

Post by 1789 » Tue Nov 12, 2019 6:03 pm

If you already decided to get rid of all your individual stocks and invest in market, all i can say is congrats and welcome to the right course. I would not recommend holding tech funds like VGT. That one particularly heavily invested in MSFT and AAPLE. I don't see a good reason why you would want that. BRK.B may not perform well going 20-30 years into the future. Best to stick with market. Good luck!
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

surfstar
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Re: BRK.B

Post by surfstar » Tue Nov 12, 2019 6:14 pm

Keep one share and get 8% discount at Geico.
viewtopic.php?t=209721

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Wiggums
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Re: BRK.B

Post by Wiggums » Tue Nov 12, 2019 6:20 pm

GetRichQuick wrote:
Tue Nov 12, 2019 5:23 pm
If you have any stock in an IRA (such as your BRK.B) - I would definitely sell it and reinvest per your asset allocation. You have no tax consequences for doing so. Also, stop reinvesting dividends and invest the proceeds per your asset allocation.

If you have stock in taxable accounts, I would sell all of the losers and enough winners to offset the loss. After that, I would sell the winners based on your willingness to pay taxes balanced with your desire to take on increased risk.

Good luck!
+1

cheesepep
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Re: BRK.B

Post by cheesepep » Tue Nov 12, 2019 7:04 pm

Sell some of the losers this year and some next year for tax loss harvesting. The same for the gains to balance out the losses. I'm 100% individual stocks so it depends on the individual. But I do like dividends but I do occasionally hold a non-dividend stock (currently holding LUK).

Outer Marker
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Re: BRK.B

Post by Outer Marker » Tue Nov 12, 2019 7:19 pm

Bernard wrote:
Tue Nov 12, 2019 5:10 pm
I'm a big Buffet fan and feel that BRK.B is as conservative as it gets when it comes to individual stocks, but Berkshire doesn't pay any dividends, and it seems like they can't really outperform the market anymore either. So I'm consider selling them all and investing the money in Vanguard instead.

What are your thoughts?
Berkshire is not really an "individual stock" but a holding company made up of dozens of individual companies, ranging from GEICO to Dairy Queen to NetJets (all wholly owned). In addition, Berkshire has major holdings in other common stocks, including Coca Cola, American Airlines, and, yes, Amazon. https://www.cnbc.com/berkshire-hathaway-portfolio/

Warren has had a remarkable run since the '60s, but he himself recommends individual investors use mutual funds. So, in holding BRK.B you're making a bet that Warren, or his successor, is going to to a better job allocating your money than the market. Its not a bad bet, and I held BRK for a long time myself before committing to an all-index portfolio.

The fact that BRK doesn't pay dividends is a plus if you want to hold it outside of tax-advantaged accounts. Your funds are reinvested and you aren't taxes on the dividends at your normal marginal rate.

miket29
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Re: BRK.B

Post by miket29 » Tue Nov 12, 2019 7:34 pm

Bernard wrote:
Tue Nov 12, 2019 5:10 pm
And then I have a truck load of BRK.B in my Roth IRAs, which I started buying about 8 years ago. They've done okay, but not remarkable compared to, say Amazon or Netflix. I'm a big Buffet fan and feel that BRK.B is as conservative as it gets when it comes to individual stocks, but Berkshire doesn't pay any dividends, and it seems like they can't really outperform the market anymore either. So I'm consider selling them all and investing the money in Vanguard instead.
I too had a big holding of BRKB, drawn down as I near retirement. I held it for over 2 decades instead of a large-cap index fund in my regular brokerage account since it didn't pay dividends or capital gains, so no tax consequences until sold. I also had plenty in my 401K instead of a large-cap index fund.

The board sentiment is to have index funds instead of stocks, but as been pointed out BRKB isn't really a single company but an investment in several. Buffett never claimed to outperform in a bull market, but over an entire cycle. in Berkshire Hathaway’s 2013 Chairman’s Letter he wrote “Over the stock market cycle between year ends 2007 and 2013, we overperformed the S&P. Through full cycles in future years, we expect to do that again. If we fail to do so, we will not have earned our pay. After all, you could always own an index fund and be assured of S&P results.”

He also wrote in a shareholder letter “What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.” I'm thinking this is one of those times. We've been in a prolonged bull market so I'm actually pleasantly surprised that BRKB has done as well as it has. Buffett is sitting on an enormous pile of cash. Someday the market will decline, and at that point I expect Buffett or his successors to make moves that will pay off handsomely over the longer term. I don't have a prediction of when the market will decline or how long it will be to recovery but if you aren't willing to wait the years it may take, now is the time to sell at an attractive price and reallocate your portfolio as you prefer. For me, I'm holding my remaining BRKB and expect to do so for many years.

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BenfromToronto
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Re: BRK.B

Post by BenfromToronto » Tue Nov 12, 2019 10:57 pm

miket29 wrote:
Tue Nov 12, 2019 7:34 pm
The board sentiment is to have index funds instead of stocks, but as been pointed out BRKB isn't really a single company but an investment in several. [...]
For me, I'm holding my remaining BRKB and expect to do so for many years.
Same here (it is about 10% of my invested assets).
Becoming rich slowly is simple --earn, save, invest following a Bogleheads philosophy-- but it is not easy.

Outer Marker
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Re: BRK.B

Post by Outer Marker » Tue Nov 12, 2019 11:03 pm

Just to be clear, Berkshire holds a lot more than "several" (3-5) companies. Its more like 50+ companies across a broad range of sectors. More like a mutual fund than an individual stock.

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birdog
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Re: BRK.B

Post by birdog » Wed Nov 13, 2019 4:53 am

I would probably sell everything and go with the total stock market index fund. I would for sure at least sell everything that is not brk.b.

dalbright
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Re: BRK.B

Post by dalbright » Wed Nov 13, 2019 7:10 am

Bernard wrote:
Tue Nov 12, 2019 5:10 pm
Years before I discovered the FIRE movement and low cost index funds, I invested all my money in individual stocks. Some were winners, some losers. A few years ago, after seeing the light, I started selling those stocks whenever they experienced a spike and invested the money in VTI, VOO, and VGT instead.

I still own 11 individual stocks, of which about half are real losers that went down in value between 40 and 90 percent, and the other half are winners that have tripled and quadrupled in value.

And then I have a truck load of BRK.B in my Roth IRAs, which I started buying about 8 years ago. They've done okay, but not remarkable compared to, say Amazon or Netflix. I'm a big Buffet fan and feel that BRK.B is as conservative as it gets when it comes to individual stocks, but Berkshire doesn't pay any dividends, and it seems like they can't really outperform the market anymore either. So I'm consider selling them all and investing the money in Vanguard instead.

What are your thoughts?
I would sell the 11 individual stocks and diversify according to your new plan and goals. Then consider selling 1/2 of brkb. This is clearly your favorite stock and is often felt to be a decent diversifier due to the underlying holdings as well as large cash pile. There are single stock risks with the age of warren etc but I think holding some will help you with the fear of missing out aspect.

carolinaman
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Re: BRK.B

Post by carolinaman » Wed Nov 13, 2019 7:12 am

Buffett himself has acknowledged the difficulty for his fund to outperform the market given its huge size. I would sell BRK and put in VTI. You no longer have to monitor the fund daily. VTI is a set it and forget it investment. Any individual stock must be regularly monitored, including BRK.

When I invested in individual stocks and active funds, I checked market results almost every day. Nowadays, I sometimes go a week or more without checking market results, and I really do not need to check it that often. For me, getting your AA right and investing in ultra low cost index funds simplifies your investment life and gives peace of mind, and you will outperform 80% or more of the market participants over the long run.

Outer Marker
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Re: BRK.B

Post by Outer Marker » Wed Nov 13, 2019 10:25 am

carolinaman wrote:
Wed Nov 13, 2019 7:12 am
Any individual stock must be regularly monitored, including BRK.
Why? According to Buffett "the right holding period is forever." Close monitoring is contrary to what both Warren and Bogle recommend. Place your bet and stay the course for the next 10-20 years . . .

illumination
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Re: BRK.B

Post by illumination » Wed Nov 13, 2019 11:45 am

If it's in a Roth IRA, I'd sell it. If it was in a taxable account with a huge tax liability, I think you can make a case to just keep it.

The test of "would I buy this today?" is a good one. Would you buy a "truck load" of Berkshire today if you had a windfall? Probably not.

And don't underestimate the value of a figurehead. A big part of the Berkshire story is Buffett, at least for some investors. I don't think it will collapse or anything like that when he's gone, but I would already argue Berkshire's best days are in the past and I bet the S&P500 continues to outperform Berkshire like it already has for the last several years.

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willthrill81
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Re: BRK.B

Post by willthrill81 » Wed Nov 13, 2019 11:57 am

Outer Marker wrote:
Tue Nov 12, 2019 7:19 pm
Bernard wrote:
Tue Nov 12, 2019 5:10 pm
I'm a big Buffet fan and feel that BRK.B is as conservative as it gets when it comes to individual stocks, but Berkshire doesn't pay any dividends, and it seems like they can't really outperform the market anymore either. So I'm consider selling them all and investing the money in Vanguard instead.

What are your thoughts?
Berkshire is not really an "individual stock" but a holding company made up of dozens of individual companies, ranging from GEICO to Dairy Queen to NetJets (all wholly owned). In addition, Berkshire has major holdings in other common stocks, including Coca Cola, American Airlines, and, yes, Amazon. https://www.cnbc.com/berkshire-hathaway-portfolio/
Right. Although I certainly espouse index funds, BRK is far more like a mutual fund than an individual stock. And it carries the advantage of not throwing off any dividends, so it's a good holding in that regard for a taxable account.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

carolinaman
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Re: BRK.B

Post by carolinaman » Thu Nov 14, 2019 5:09 pm

Outer Marker wrote:
Wed Nov 13, 2019 10:25 am
carolinaman wrote:
Wed Nov 13, 2019 7:12 am
Any individual stock must be regularly monitored, including BRK.
Why? According to Buffett "the right holding period is forever." Close monitoring is contrary to what both Warren and Bogle recommend. Place your bet and stay the course for the next 10-20 years . . .
I respectfully disagree. The business conditions for a company or fund can change dramatically and change their profitability and outlook quickly. They may go bankrupt too. The market has its up and downs, but an individual stock's have much greater extreme. Some grow into large prosperous businesses like Apple and Google. Others do well for awhile and eventually go bankrupt. If you are monitoring your stocks, you may have a chance to sell before too much damage is done.

I believe Mr Buffett meant that ideally you want to invest in companies forever, but not if the business changes for the bad. He sells stocks every year so obviously he is not holding every stock forever.

an_asker
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Re: BRK.B

Post by an_asker » Thu Nov 14, 2019 5:26 pm

Bernard wrote:
Tue Nov 12, 2019 5:10 pm
[...]
I still own 11 individual stocks, of which about half are real losers that went down in value between 40 and 90 percent, and the other half are winners that have tripled and quadrupled in value.
[...]
What are your thoughts?
My thoughts: Compared to me, you are a genius. Whatever rocks your boat!!

Outer Marker
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Re: BRK.B

Post by Outer Marker » Thu Nov 14, 2019 11:05 pm

carolinaman wrote:
Thu Nov 14, 2019 5:09 pm
Outer Marker wrote:
Wed Nov 13, 2019 10:25 am
carolinaman wrote:
Wed Nov 13, 2019 7:12 am
Any individual stock must be regularly monitored, including BRK.
Why? According to Buffett "the right holding period is forever." Close monitoring is contrary to what both Warren and Bogle recommend. Place your bet and stay the course for the next 10-20 years . . .
I respectfully disagree. The business conditions for a company or fund can change dramatically and change their profitability and outlook quickly. They may go bankrupt too. The market has its up and downs, but an individual stock's have much greater extreme. Some grow into large prosperous businesses like Apple and Google. Others do well for awhile and eventually go bankrupt. If you are monitoring your stocks, you may have a chance to sell before too much damage is done.

I believe Mr Buffett meant that ideally you want to invest in companies forever, but not if the business changes for the bad. He sells stocks every year so obviously he is not holding every stock forever.
A few points -

First, Berkshire is NOT an "individual stock" it is a diversified holding company with 50+ companies with many that are wholly owned.

Second, Buffet is a died-in-the wool buy-and-hold value investor. It is extremely rare for him to sell a company he owns. So rare, that when he does, it makes news. https://www.wsj.com/articles/warren-buf ... 1551221992. He adjusts his minority positions from time to time, but for the most part is in it for the long haul.

Third, if you believe in the markets and in indexing, everything that is known or knowable about a stock is factored into its price, virtually in real time. You can't possibly match the speed of sophistocated automated trades, programmed by guys that sit in front of computer screens all day on Wall Street. Amature "monitoring" is much more likely to lead to losses by way of Buy High, Sell Low. Whether its an individual stock, or owning the market, you are better riding out the dips and staying the course.

retired@50
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Re: BRK.B

Post by retired@50 » Fri Nov 15, 2019 12:07 am

willthrill81 wrote:
Wed Nov 13, 2019 11:57 am
Outer Marker wrote:
Tue Nov 12, 2019 7:19 pm
Bernard wrote:
Tue Nov 12, 2019 5:10 pm
I'm a big Buffet fan and feel that BRK.B is as conservative as it gets when it comes to individual stocks, but Berkshire doesn't pay any dividends, and it seems like they can't really outperform the market anymore either. So I'm consider selling them all and investing the money in Vanguard instead.

What are your thoughts?
Berkshire is not really an "individual stock" but a holding company made up of dozens of individual companies, ranging from GEICO to Dairy Queen to NetJets (all wholly owned). In addition, Berkshire has major holdings in other common stocks, including Coca Cola, American Airlines, and, yes, Amazon. https://www.cnbc.com/berkshire-hathaway-portfolio/
Right. Although I certainly espouse index funds, BRK is far more like a mutual fund than an individual stock. And it carries the advantage of not throwing off any dividends, so it's a good holding in that regard for a taxable account.
I wonder if BRK.B wouldn't be good in an HSA account for California taxpayers who have an HSA...??? Since California chooses to tax any interest and dividends that HSA account holders earn each year, and since BRK.B doesn't pay any interest or dividends, you wouldn't have to worry about those pesky state taxes... Just long term capital gains taxes when sold far into the future... Thoughts?

Regards,

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willthrill81
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Re: BRK.B

Post by willthrill81 » Fri Nov 15, 2019 12:19 am

retired@50 wrote:
Fri Nov 15, 2019 12:07 am
willthrill81 wrote:
Wed Nov 13, 2019 11:57 am
Outer Marker wrote:
Tue Nov 12, 2019 7:19 pm
Bernard wrote:
Tue Nov 12, 2019 5:10 pm
I'm a big Buffet fan and feel that BRK.B is as conservative as it gets when it comes to individual stocks, but Berkshire doesn't pay any dividends, and it seems like they can't really outperform the market anymore either. So I'm consider selling them all and investing the money in Vanguard instead.

What are your thoughts?
Berkshire is not really an "individual stock" but a holding company made up of dozens of individual companies, ranging from GEICO to Dairy Queen to NetJets (all wholly owned). In addition, Berkshire has major holdings in other common stocks, including Coca Cola, American Airlines, and, yes, Amazon. https://www.cnbc.com/berkshire-hathaway-portfolio/
Right. Although I certainly espouse index funds, BRK is far more like a mutual fund than an individual stock. And it carries the advantage of not throwing off any dividends, so it's a good holding in that regard for a taxable account.
I wonder if BRK.B wouldn't be good in an HSA account for California taxpayers who have an HSA...??? Since California chooses to tax any interest and dividends that HSA account holders earn each year, and since BRK.B doesn't pay any interest or dividends, you wouldn't have to worry about those pesky state taxes... Just long term capital gains taxes when sold far into the future... Thoughts?

Regards,
Well, the simplest solution is not live in California. :wink: Although in all seriousness, the CA resident might retire to a state without LTCG taxes.

But yes, this is a situation where owning a 'dividend-free-quasi-mutual fund' like BRK.B might make sense.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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