Berkshire Hathaway vs VTI

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Gaston
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Berkshire Hathaway vs VTI

Post by Gaston »

I recently read that Berkshire Hathaway’s phenomenal performance stemmed from its early years, and that in recent decades it has slightly lagged a total market index. That sounded odd to me, so I thought I’d check it out.

I am not an expert with Portfolio Visualizer (PV), and I might have messed it up. But I compared BRK.B against VTI over 30 years, from 1992 thru 2021, and VTI produced the greater return.

Can someone more proficient with PV confirm whether this is the case? Thx.
Makefile
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Re: Berkshire Hathaway vs VTI

Post by Makefile »

VTI has not existed that long. Try VTSMX in its place.
fwellimort
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Re: Berkshire Hathaway vs VTI

Post by fwellimort »

If you want fast numbers for end of year 2020: https://berkshirehathaway.com/2020ar/2020ar.pdf
Head to page 4.

Other than that, if you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
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Gaston
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Re: Berkshire Hathaway vs VTI

Post by Gaston »

fwellimort wrote: Wed Jan 12, 2022 7:51 pm If you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
Thx. Over 30 years BRK.B beats VTSAX. But over the last 10 years and the last 20 years, VTSAX comes out ahead. So maybe the article I read is correct.
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Re: Berkshire Hathaway vs VTI

Post by Fat Tails »

In a tax-deferred account I’d go with VTI. I have BRK.B in a taxable account because it is very tax efficient (no dividends, not sure about capital gains, but I don’t recall any). If you want dividend income, then perhaps you want VTI in taxable.

Cheers.
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mikeyzito22
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Re: Berkshire Hathaway vs VTI

Post by mikeyzito22 »

Gaston wrote: Wed Jan 12, 2022 8:00 pm
fwellimort wrote: Wed Jan 12, 2022 7:51 pm If you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
Thx. Over 30 years BRK.B beats VTSAX. But over the last 10 years and the last 20 years, VTSAX comes out ahead. So maybe the article I read is correct.
So, I just wanted to point out that BRK.B is a stock with a market cap. Although you may think of it as diversified, it is actively managed as a stock that owns businesses with advisors including "The Oracle" that makes decisions via a board. It is not an index fund. It is not as diversified as an index fund. Diversification is not its strong suit although some would have you believe that. VTI has much more diversification.

Just know, first, that past performance is not a guarantee of future results, and that a total market index will most likely beat a conglomeration of good stocks and picks by a great stock picker with a great board of stock pickers. No disrespect to Mr. Buffet, but managers, lives, and companies are lost all the time.
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Re: Berkshire Hathaway vs VTI

Post by informal guide »

mikeyzito22 wrote: Wed Jan 12, 2022 11:26 pm
Gaston wrote: Wed Jan 12, 2022 8:00 pm
fwellimort wrote: Wed Jan 12, 2022 7:51 pm If you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
Thx. Over 30 years BRK.B beats VTSAX. But over the last 10 years and the last 20 years, VTSAX comes out ahead. So maybe the article I read is correct.
So, I just wanted to point out that BRK.B is a stock with a market cap. Although you may think of it as diversified, it is actively managed as a stock that owns businesses with advisors including "The Oracle" that makes decisions via a board. It is not an index fund. It is not as diversified as an index fund. Diversification is not its strong suit although some would have you believe that. VTI has much more diversification.

Just know, first, that past performance is not a guarantee of future results, and that a total market index will most likely beat a conglomeration of good stocks and picks by a great stock picker with a great board of stock pickers. No disrespect to Mr. Buffet, but managers, lives, and companies are lost all the time.
+1

I bought my BRK in the mId-1980's and am more than satisfied. Yes, it is "actively managed", but, unlike an actively managed mutual fund (*e.g., PRIMECAP), there has never been a capital gain or dividend distribution. My basis is less than 1% of current market value. But remember, past resulte are never a driver of future results. My DM tells me I should have bought 10X what I bought inthe 1980's.
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Re: Berkshire Hathaway vs VTI

Post by informal guide »

dup deleted
Last edited by informal guide on Thu Jan 13, 2022 9:28 pm, edited 1 time in total.
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rob
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Re: Berkshire Hathaway vs VTI

Post by rob »

Gaston wrote: Wed Jan 12, 2022 8:00 pm
fwellimort wrote: Wed Jan 12, 2022 7:51 pm If you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
Thx. Over 30 years BRK.B beats VTSAX. But over the last 10 years and the last 20 years, VTSAX comes out ahead. So maybe the article I read is correct.
Or possibly that hi tech has run hot the last couple of decades and BH tends to not be technology centric.
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Gaston
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Re: Berkshire Hathaway vs VTI

Post by Gaston »

mikeyzito22 wrote: Wed Jan 12, 2022 11:26 pm So, I just wanted to point out that BRK.B is a stock with a market cap. Although you may think of it as diversified, it is actively managed as a stock that owns businesses with advisors including "The Oracle" that makes decisions via a board.
Yes, thank you, I do understand your comment. I might even go a bit further.

Those who manage BH sometimes buy and hold the shares of companies that they believe offer superior growth. At other times, they actively manage the companies whose shares they own (i.e., they change / appoint the managers of the companies, they influence the strategic direction of the companies, they set operating targets for the companies, etc). In this sense, they are much more than just active stock pickers. They are driving value from the businesses.

At least, that is my understanding.
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Re: Berkshire Hathaway vs VTI

Post by inbox788 »

rob wrote: Wed Jan 12, 2022 11:44 pm
Gaston wrote: Wed Jan 12, 2022 8:00 pm
fwellimort wrote: Wed Jan 12, 2022 7:51 pm If you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
Thx. Over 30 years BRK.B beats VTSAX. But over the last 10 years and the last 20 years, VTSAX comes out ahead. So maybe the article I read is correct.
Or possibly that hi tech has run hot the last couple of decades and BH tends to not be technology centric.
For a period of 15 years, between 2003 and 2018, they didn't differ by all that much.

https://www.portfoliovisualizer.com/bac ... ion2_2=100
AdrianC
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Re: Berkshire Hathaway vs VTI

Post by AdrianC »

Gaston wrote: Wed Jan 12, 2022 8:00 pm
fwellimort wrote: Wed Jan 12, 2022 7:51 pm If you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
Thx. Over 30 years BRK.B beats VTSAX. But over the last 10 years and the last 20 years, VTSAX comes out ahead. So maybe the article I read is correct.
The article is no doubt correct.

You do have to consider the start and end points, though. 20 years ago was when the market (S&P500) was down after the dot com bubble. Now the market is arguably rather bubbly once again.

Try using SPY (S&P500 ETF) instead of VTI/VTSAX to get longer date range. I first bought Berkshire in 1999. Since then, BRK vs SPY is a clear win for Berkshire, and I've paid no taxes (yet). I'd argue the market now is more like 2000 than 2002. Try the comparison from 2000 - 2022 to see how the start point affects the outcome.
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Re: Berkshire Hathaway vs VTI

Post by nisiprius »

A few things to be aware of.

First, people sometimes insinuate that big famous blue-chip stocks are not like other stocks and can be thought of as "safe." It isn't so. There is not one thing people say about Berkshire Hathaway that wasn't being said about GE twenty years ago. GE was supposed be, literally, the best-managed company in the world, and to be "diversified" because it was in thirty different businesses, every one of which was one of the top three in its category in the world.

Second, I can't say this too strongly, Berkshire Hathaway is an individual stock. It. Is. NOT. a mutual fund. Mutual funds are specialized companies created by a specific law, the Investment Company Act of 1940, which contains regulations intended to protect investors--not against losing money, but against certain kinds of risk. That is why there is a distinction between "hedge funds" and mutual funds. Individual stocks don't need to follow any of these regulations and can take risks that mutual funds can't take. Berkshire Hathaway does take these risks.

Mutual funds aren't allowed to own more than 10% of the stock in any single company. Berkshire Hathaway does. As of the end of 2020, 35% of Davita's stock, 27% of Kraft-Heinz's, 19% of American Express's, etc.

Mutual funds aren't allowed to have more than 33% in actual leverage. Berkshire Hathaway does. It's buried in business internals but it is believed to be about 1.6x "operationally leveraged." I don't understand the actual business-financial relationships that amount to leverage, but that's about the number I keep reading.

Mutual funds are not allowed to hold the actual stocks in the fund. They are held by an independent custodian bank. This minimizes the chances of shenanigans, such as the false statements issued by Bernard Madoff's firm (claiming the client owned assets that the firm had not actually bought).

Third, Warren Buffett's advice to individual investors is consistent. When he is asked, his answer is that individual investors should invest in "an S&P 500 index fund." Much discussion in the forum about whether to interpret that to mean no international stocks, no small-caps, etc. and he's never made that clear, but "an S&P 500 index fund" is his advice.

Fourth, yes, it is perfectly true that Berkshire Hathaway has been doing roughly the same and a little worse than an S&P 500 index fund since about 2004, and you can use this as a starting point for exploring. Try setting the starting year at 2004.

PortfolioVisualizer, BRK.B versus the Vanguard 500 Index Fund

Like many "value tilted" portfolios, Berkshire Hathaway did wonderfully during the stock market decline after the tech crash, 2000-2003, going up while the stock market was going down. And that hasn't happened since.
Last edited by nisiprius on Thu Jan 13, 2022 9:35 pm, edited 2 times in total.
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Re: Berkshire Hathaway vs VTI

Post by JoMoney »

nisiprius wrote: Thu Jan 13, 2022 8:14 am...
Mutual funds aren't allowed to have more than 33% in actual leverage. Berkshire Hathaway does. It's buried in business internals but it is believed to be about 1.6x "operationally leveraged." I don't understand the actual business-financial relationships that amount to leverage, but that's about the number I keep reading...
One of the sources of that leverage is/has been insurance float - money paid in insurance premiums that is (at some point) expected to be paid back to policy holders on insurance claims. Buffett has on several occasions (in public statements and corporate annual reports/disclosures) mentioned they could be especially vulnerable to a mega-catastrophe risk.
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Re: Berkshire Hathaway vs VTI

Post by invest4 »

It's apples vs oranges to me. I prefer the index approach so my interest in Berkshire Hathaway is the same as other individual stocks...no thank you.
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Re: Berkshire Hathaway vs VTI

Post by GP813 »

If you own VTI/VTSAX than 1.02% of your money is in Berkshire Hathaway. VOO/VFIAX is a little more at 1.32%.

Then you have to remember that a lot of the public companies that Berkshire holds, you also own in index funds like Apple, Bank of America, American Express, Coca-Cola and so on.
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Re: Berkshire Hathaway vs VTI

Post by Robert_007 »

Fat Tails wrote: Wed Jan 12, 2022 11:06 pm In a tax-deferred account I’d go with VTI. I have BRK.B in a taxable account because it is very tax efficient (no dividends, not sure about capital gains, but I don’t recall any). If you want dividend income, then perhaps you want VTI in taxable.

Cheers.
+1
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Re: Berkshire Hathaway vs VTI

Post by quietseas »

rob wrote: Wed Jan 12, 2022 11:44 pm
Gaston wrote: Wed Jan 12, 2022 8:00 pm
fwellimort wrote: Wed Jan 12, 2022 7:51 pm If you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
Thx. Over 30 years BRK.B beats VTSAX. But over the last 10 years and the last 20 years, VTSAX comes out ahead. So maybe the article I read is correct.
Or possibly that hi tech has run hot the last couple of decades and BH tends to not be technology centric.
50% of BRK's equity and 25% of BRK market cap is in one tech stock -- AAPL, so it is a non-diversified tech holding (well timed).
Berkshire's 887.1 million shares in the iPhone maker swelled to a record value of $159 billion on Friday, a 342% increase from its original cost basis of about $36 billion.
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Re: Berkshire Hathaway vs VTI

Post by GP813 »

quietseas wrote: Thu Jan 13, 2022 10:38 pm
rob wrote: Wed Jan 12, 2022 11:44 pm
Gaston wrote: Wed Jan 12, 2022 8:00 pm
fwellimort wrote: Wed Jan 12, 2022 7:51 pm If you want to check in portfolio visualizer, you can use VTSAX or VTSMX.
Thx. Over 30 years BRK.B beats VTSAX. But over the last 10 years and the last 20 years, VTSAX comes out ahead. So maybe the article I read is correct.
Or possibly that hi tech has run hot the last couple of decades and BH tends to not be technology centric.
50% of BRK's equity and 25% of BRK market cap is in one tech stock -- AAPL, so it is a non-diversified tech holding (well timed).
Berkshire's 887.1 million shares in the iPhone maker swelled to a record value of $159 billion on Friday, a 342% increase from its original cost basis of about $36 billion.

Their stake in Apple alone is bigger by market cap than all but 50 to 60 companies of the S&P 500.

https://companiesmarketcap.com/usa/larg ... arket-cap/
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Re: Berkshire Hathaway vs VTI

Post by sf_tech_saver »

If you want to compare VTI to a single "Blue Chip" stock compare it to Apple :) It gets crushed!

....but that's not the point :)
VTI is a modern marvel
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Re: Berkshire Hathaway vs VTI

Post by Nathan Drake »

Berkshire is a Value company. It won’t do as well when growth dominates

But over the long term Value > Growth
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Re: Berkshire Hathaway vs VTI

Post by JoMoney »

Nathan Drake wrote: Fri Jan 14, 2022 2:37 am...
But over the long term Value > Growth
:confused
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Re: Berkshire Hathaway vs VTI

Post by fixi reinhart »

Honestly, you can't go wrong either way.

Berkshire Hathaway is perhaps the most decentralized and diversified company out there, with lots of good businesses, masterful capital allocation and honest and compenetent management that is extremely shareholder oriented.

I like Berkshire because I believe in their investment process. (Value + Quality). YMMV.
Last edited by fixi reinhart on Fri Jan 14, 2022 8:52 am, edited 1 time in total.
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Re: Berkshire Hathaway vs VTI

Post by fixi reinhart »

JoMoney wrote: Thu Jan 13, 2022 8:44 am One of the sources of that leverage is/has been insurance float - money paid in insurance premiums that is (at some point) expected to be paid back to policy holders on insurance claims. Buffett has on several occasions (in public statements and corporate annual reports/disclosures) mentioned they could be especially vulnerable to a mega-catastrophe risk.
I believe the chance of any event causing Berkshire to experience financial problems is essentially zero.
We will always be prepared for the thousand-year flood; in fact, if it occurs we will be selling life jackets
to the unprepared. Berkshire played an important role as a “first responder” during the 2008-2009
meltdown, and we have since more than doubled the strength of our balance sheet and our earnings
potential. Your company is the Gibraltar of American business and will remain so.
https://www.berkshirehathaway.com/Speci ... 202014.pdf
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Re: Berkshire Hathaway vs VTI

Post by Jack FFR1846 »

This very much interests me. Is there another single stock that does 2 things?

1) Follows the S&P or VTI somewhat.

2) Pays no "forced tax" dividends.

These are the 2 reasons I own BRK and have slowly been converting my total market ETFs over to BRK. I am not yet retired but will be very soon.
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fixi reinhart
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Re: Berkshire Hathaway vs VTI

Post by fixi reinhart »

Jack FFR1846 wrote: Fri Jan 14, 2022 1:24 pm This very much interests me. Is there another single stock that does 2 things?

1) Follows the S&P or VTI somewhat.

2) Pays no "forced tax" dividends.

These are the 2 reasons I own BRK and have slowly been converting my total market ETFs over to BRK. I am not yet retired but will be very soon.
:sharebeer

That's what makes BRK unique and interesting for long-term compounding.
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Re: Berkshire Hathaway vs VTI

Post by inbox788 »

fixi reinhart wrote: Fri Jan 14, 2022 1:26 pm
Jack FFR1846 wrote: Fri Jan 14, 2022 1:24 pm This very much interests me. Is there another single stock that does 2 things?

1) Follows the S&P or VTI somewhat.

2) Pays no "forced tax" dividends.

These are the 2 reasons I own BRK and have slowly been converting my total market ETFs over to BRK. I am not yet retired but will be very soon.
:sharebeer

That's what makes BRK unique and interesting for long-term compounding.
The could someday pay out dividends, but sure doesn't look like a popular idea.
I would be remiss if I didn’t salute another key constituency that makes Berkshire special: our shareholders.
Berkshire truly has an owner base unlike that of any other giant corporation. That fact was demonstrated in
spades at last year’s annual meeting, where the shareholders were offered a proxy resolution:
RESOLVED: Whereas the corporation has more money than it needs and since the owners unlike
Warren are not multi billionaires, the board shall consider paying a meaningful annual dividend on
the shares.

The sponsoring shareholder of that resolution never showed up at the meeting, so his motion was not
officially proposed. Nevertheless, the proxy votes had been tallied, and they were enlightening.
Not surprisingly, the A shares – owned by relatively few shareholders, each with a large economic interest
– voted “no” on the dividend question by a margin of 89 to 1.
The remarkable vote was that of our B shareholders. They number in the hundreds of thousands – perhaps
even totaling one million – and they voted 660,759,855 “no” and 13,927,026 “yes,” a ratio of about 47 to 1.
Our directors recommended a “no” vote but the company did not otherwise attempt to influence
shareholders. Nevertheless, 98% of the shares voting said, in effect, “Don’t send us a dividend but instead
reinvest all of the earnings.” To have our fellow owners – large and small – be so in sync with our
managerial philosophy is both remarkable and rewarding
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Re: Berkshire Hathaway vs VTI

Post by AlwaysLearningMore »

Gaston wrote: Wed Jan 12, 2022 7:47 pm I recently read that Berkshire Hathaway’s phenomenal performance stemmed from its early years, and that in recent decades it has slightly lagged a total market index. That sounded odd to me, so I thought I’d check it out.

I am not an expert with Portfolio Visualizer (PV), and I might have messed it up. But I compared BRK.B against VTI over 30 years, from 1992 thru 2021, and VTI produced the greater return.

Can someone more proficient with PV confirm whether this is the case? Thx.
During the Q&A session of a recent BH meeting a question from the floor centered around buying the S&P 500 vs BRK. As I recall Mr. Munger's response was that 'he was comfortable Berkshire...as Berkshire held higher quality companies.' (paraphrasing)
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Re: Berkshire Hathaway vs VTI

Post by abuss368 »

sf_tech_saver wrote: Thu Jan 13, 2022 11:45 pm If you want to compare VTI to a single "Blue Chip" stock compare it to Apple :) It gets crushed!

....but that's not the point :)
Plus Berkshire does not pay dividends! All about the cash flows😂

Best.
Tony
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Re: Berkshire Hathaway vs VTI

Post by venkman »

Gaston wrote: Wed Jan 12, 2022 7:47 pm I recently read that Berkshire Hathaway’s phenomenal performance stemmed from its early years, and that in recent decades it has slightly lagged a total market index. That sounded odd to me, so I thought I’d check it out.
Most of Warren Buffett's outperformance over his career can be explained by factor exposure (size, value, profitability, etc.) Which is not to say he doesn't deserve credit, because he was investing in those factors before they were widely known.

The problem with BRK is the same problem faced by mutual funds that outperform and see loads of money rush in: they get too big. Buying a big stake in a bargain-priced small company barely moves the needle when your market cap is closing in on $1 trillion. And even if you find large-cap bargains, you can't just move billions of dollars in all at once without running up the price. I would expect BRK to more or less match VTI from here on out, though it could still be a useful holding for some because of its non-dividend-paying status and its imperfect correlation with the broad US market.
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