Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

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sco
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by sco » Wed Mar 07, 2018 1:03 am

Texanbybirth wrote:
Tue Mar 06, 2018 1:16 pm
core4portfolio wrote:
Mon Mar 05, 2018 11:33 am
I have 1 stock of BRK.B to get the Geico 8% discount. I bought it few week before @ 216 for 1 share which saves 32 bucks on my 6 months of insurance on my new CRV. I will be holding this one share since then. But not planning to sell that one share.
Since OP post is using the word - instead: I would say No I dont invest instead of SP500
We're with GEICO, and I hadn't heard of this benefit. If we were to purchase a share of BRK.B in taxable, how would I go about indicating this on the website/calling GEICO?
Just redo your quote online, or call them.

But why own it in taxable? When you could own it in a Roth or IRA? That way the trade doesn't have tax affects?

davidsorensen32
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by davidsorensen32 » Wed Mar 07, 2018 1:08 am

I do. So do many others. Berkshire Hathaway A has only a few thousand owners and they are typically held forever and never taxed - not on dividends and not on capital gains because when the owners pass away, their inheritors get it on step up basis. With Index Funds you get both the good and the bad. With Berkshire you get only the best. At least so far. When Buffett is gone, anything can happen. He himself recommends that you should only invest in the S&P500 + cash. That should answer your question.
uberational44 wrote:
Sun Mar 04, 2018 5:02 pm
It would be far more tax efficient to hold the stocks as the dividends would be taxed differently...

Obviously, you are be taking a punt that the company will survive after he departs, but the man has had so long to cement it's future that it is sbound to do well even when he's gone...

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wshang
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by wshang » Wed Mar 07, 2018 10:58 am

bgf wrote:
Tue Mar 06, 2018 9:35 am
berkshire is more tax efficient and cost effective than an SP500 fund. though taxes differ for individuals, if you held berkshire for 20 years, you paid precisely $0 in taxes and expenses, except maybe your broker fee which would cancel out as you would have paid that to purchase an SP500 ETF. with the SP500, you also paid an expense ratio and taxes on your dividends throughout that 20 year period. both of those decreased your total return even if dividends were reinvested without cost. with the sp500, you also had to deal with capital gains during that period and the taxes associated with those. not so with berkshire.
Excellent point. Berkshire for me is like a private equity fund. It has a special relationship with the US government - just take a look at the role it played in 2009 with Bank America and Merrill Lynch. Look at the special niche it enjoys in regards to dividend payout.
Berkshire is in a position unlike any other American owned private equity firm in the world. It can swallow public firms whole and privatize their earnings. For those who are collecting Social Security, it can shield gains and prevent erosion of benefits far superior to the SP500.

The Falcon
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by The Falcon » Fri Mar 09, 2018 5:20 am

wshang wrote:
Wed Mar 07, 2018 10:58 am
bgf wrote:
Tue Mar 06, 2018 9:35 am
berkshire is more tax efficient and cost effective than an SP500 fund. though taxes differ for individuals, if you held berkshire for 20 years, you paid precisely $0 in taxes and expenses, except maybe your broker fee which would cancel out as you would have paid that to purchase an SP500 ETF. with the SP500, you also paid an expense ratio and taxes on your dividends throughout that 20 year period. both of those decreased your total return even if dividends were reinvested without cost. with the sp500, you also had to deal with capital gains during that period and the taxes associated with those. not so with berkshire.
Excellent point. Berkshire for me is like a private equity fund. It has a special relationship with the US government - just take a look at the role it played in 2009 with Bank America and Merrill Lynch. Look at the special niche it enjoys in regards to dividend payout.
Berkshire is in a position unlike any other American owned private equity firm in the world. It can swallow public firms whole and privatize their earnings. For those who are collecting Social Security, it can shield gains and prevent erosion of benefits far superior to the SP500.
Spot on. BRK.A is a like cheap PE fund with a listed securities portfolio attached. Nothing like an index. A special business imho but one who’s best days are behind it, but still one could do a lot worse.

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Soul.in.Progress
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by Soul.in.Progress » Fri Mar 09, 2018 7:58 am

We do not, mainly for just keeping things simple and on cruise control. Index funds are good enough for me.
Start by doing what is necessary; | then do what is possible; | and suddenly you are doing the impossible. | -- Francis of Assisi

bgf
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by bgf » Fri Mar 09, 2018 8:35 am

The Falcon wrote:
Fri Mar 09, 2018 5:20 am
one who’s best days are behind it, but still one could do a lot worse.
i think that is fair. i often hear the banal remark that berkshire is "too big to beat the market." i would not agree with that. i'd be willing to concede however that it is very unlikely to earn 20% annually for the next 30 years. but 15%?12%? that is significantly worse than historically, but still quite good. especially considering that back in the 60s and 70s very few knew who Buffett was, and now he's basically a household name.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

core4portfolio
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by core4portfolio » Fri Mar 09, 2018 9:55 am

Texanbybirth wrote:
Tue Mar 06, 2018 1:16 pm
core4portfolio wrote:
Mon Mar 05, 2018 11:33 am
I have 1 stock of BRK.B to get the Geico 8% discount. I bought it few week before @ 216 for 1 share which saves 32 bucks on my 6 months of insurance on my new CRV. I will be holding this one share since then. But not planning to sell that one share.
Since OP post is using the word - instead: I would say No I dont invest instead of SP500
We're with GEICO, and I hadn't heard of this benefit. If we were to purchase a share of BRK.B in taxable, how would I go about indicating this on the website/calling GEICO?
Call Geico and inform them - "you are a shareholder and heard Geico is giving discount for shareholders"
As soon as I mentioned above words, customer support told they will adjust the amount and process the discount refund
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner

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wshang
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by wshang » Fri Mar 09, 2018 10:12 am

There is yet one more advantage of owning Berkshire. They have vowed to defend the shares at 110% book value. That protects shareholders on the downside unlike any other equity. I doubt shortsellers would attempt to pit themselves against the cash reserves of Mr. Buffett even in the severest of market conditions. Conversely, Mr. Bogle has warned us that equity holders need to be ready to withstand downturns of -60%, -70% and -80%. There is at least a theoretical backstop to Berkshire that the SP500 doesn't have.

Random Walker
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by Random Walker » Fri Mar 09, 2018 11:13 am

See another post today of an essay by Larry Swedroe looking at Buffett’s performance relative to index and in light of explanatory factors.

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hand
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by hand » Fri Mar 09, 2018 12:19 pm

wshang wrote:
Fri Mar 09, 2018 10:12 am
There is yet one more advantage of owning Berkshire. They have vowed to defend the shares at 110% book value. That protects shareholders on the downside unlike any other equity. I doubt shortsellers would attempt to pit themselves against the cash reserves of Mr. Buffett even in the severest of market conditions. Conversely, Mr. Bogle has warned us that equity holders need to be ready to withstand downturns of -60%, -70% and -80%. There is at least a theoretical backstop to Berkshire that the SP500 doesn't have.
I don't agree with this assessment... Authorization to repurchase at 120% of Book is different than a commitment to do so.
In the case of a catastrophic event destined to drive the market down 50%, I wouldn't expect Buffett to arbitrarily repurchase at 120% if he thought he could buy lower.

david1082b
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by david1082b » Fri Mar 09, 2018 12:24 pm

wshang wrote:
Fri Mar 09, 2018 10:12 am
There is yet one more advantage of owning Berkshire. They have vowed to defend the shares at 110% book value. That protects shareholders on the downside unlike any other equity. I doubt shortsellers would attempt to pit themselves against the cash reserves of Mr. Buffett even in the severest of market conditions. Conversely, Mr. Bogle has warned us that equity holders need to be ready to withstand downturns of -60%, -70% and -80%. There is at least a theoretical backstop to Berkshire that the SP500 doesn't have.
What if BRK's book vaule collapses due to insurance losses? The cash might all get used up covering the losses. BRK is single-stock risk and sometimes a stock crashes for a good reason. BRK shareholders also need to be prepared for 80% losses or more.

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wshang
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by wshang » Fri Mar 09, 2018 2:03 pm

hand wrote:
Fri Mar 09, 2018 12:19 pm
wshang wrote:
Fri Mar 09, 2018 10:12 am
There is yet one more advantage of owning Berkshire. They have vowed to defend the shares at 110% book value.
I don't agree with this assessment... Authorization to repurchase at 120% of Book is different than a commitment to do so.
In the case of a catastrophic event destined to drive the market down 50%, I wouldn't expect Buffett to arbitrarily repurchase at 120% if he thought he could buy lower.
Thank you for correcting my oversight of 120% book value. Berkshire has repurchased stock; in 2010 repurchasing, 5.17% and again in 2015, 4.75%
http://www.vuru.co/analysis/BRK-B/dividendsBuybacks

"In 2014, he (Mr. Buffett) stated Berkshire would buy back stock if the valuation fell to 1.2 times book. In his more recent 2016 letter to shareholders, Buffett carefully crafted new language confirming the 1.2 multiple guidance, but cautioned investors to not read the confirmation as an outright guarantee."
https://seekingalpha.com/article/406228 ... ok-history

So while I agree in principle with your assertion, nothing historically nor documented which would lead me to believe to the contrary. If believe Berkshire Hathaway's management valued integrity, I doubt those who fully expect management to honor this guidance would be in the minority.
“. . . extraordinary wealth can be made by knowing the future" - Harry Dent

Texanbybirth
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by Texanbybirth » Mon Mar 12, 2018 12:45 pm

core4portfolio wrote:
Fri Mar 09, 2018 9:55 am
Texanbybirth wrote:
Tue Mar 06, 2018 1:16 pm
core4portfolio wrote:
Mon Mar 05, 2018 11:33 am
I have 1 stock of BRK.B to get the Geico 8% discount. I bought it few week before @ 216 for 1 share which saves 32 bucks on my 6 months of insurance on my new CRV. I will be holding this one share since then. But not planning to sell that one share.
Since OP post is using the word - instead: I would say No I dont invest instead of SP500
We're with GEICO, and I hadn't heard of this benefit. If we were to purchase a share of BRK.B in taxable, how would I go about indicating this on the website/calling GEICO?
Call Geico and inform them - "you are a shareholder and heard Geico is giving discount for shareholders"
As soon as I mentioned above words, customer support told they will adjust the amount and process the discount refund
Great, thank you! :beer

getrichslowly
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by getrichslowly » Mon Mar 12, 2018 1:17 pm

drk wrote:
Sun Mar 04, 2018 5:32 pm
uberational44 wrote:
Sun Mar 04, 2018 5:02 pm
It would be far more tax efficient to hold the stocks as the dividends would be taxed differently...

Obviously, you are be taking a punt that the company will survive after he departs, but the man has had so long to cement it's future that it is sbound to do well even when he's gone...
Just for comparison, in 2017 the Vanguard S&P 500 ETF had an SEC yield of 1.87% and 100% qualified dividends. Supposing someone had $1m invested in VOO and in BRK.B, the difference would have been $18,700 of dividend income taxed at their long-term capital gains rate. That would make a large difference if someone:
  1. is in the top tax bracket but plans to be in a lower tax bracket in retirement
  2. pays LTCG taxes now but plans to be in the lowest tax brackets in retirement
  3. expects to see long-term capital gains rates decrease in the future
I would consider (1) and (2) to be reasonable plans. In combination with an expectation that Berkshire Hathaway will continue to outperform its S&P 500 peers by at least the S&P 500's dividend rate, I become skeptical about them. I'm personally not willing to make that bet in order to save 0.2805% annually.
I agree with this. This really puts it into perspective. If you have so much wealth that you don't need to consume the paltry dividend, then you probably don't need to worry about the tax efficiency either way.

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Abe
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by Abe » Mon Mar 12, 2018 3:19 pm

core4portfolio wrote:
Fri Mar 09, 2018 9:55 am
Texanbybirth wrote:
Tue Mar 06, 2018 1:16 pm
core4portfolio wrote:
Mon Mar 05, 2018 11:33 am
I have 1 stock of BRK.B to get the Geico 8% discount. I bought it few week before @ 216 for 1 share which saves 32 bucks on my 6 months of insurance on my new CRV. I will be holding this one share since then. But not planning to sell that one share.
Since OP post is using the word - instead: I would say No I dont invest instead of SP500
We're with GEICO, and I hadn't heard of this benefit. If we were to purchase a share of BRK.B in taxable, how would I go about indicating this on the website/calling GEICO?
Call Geico and inform them - "you are a shareholder and heard Geico is giving discount for shareholders"
As soon as I mentioned above words, customer support told they will adjust the amount and process the discount refund
Just to clarify, I just called GEICO and asked for the discount. They said I would qualify for 5% discount on my auto insurance. To get 8%, I would have to be a government employee or retired government employee.
Slow and steady wins the race.

core4portfolio
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by core4portfolio » Mon Mar 12, 2018 3:46 pm

Abe wrote:
Mon Mar 12, 2018 3:19 pm
core4portfolio wrote:
Fri Mar 09, 2018 9:55 am
Texanbybirth wrote:
Tue Mar 06, 2018 1:16 pm
core4portfolio wrote:
Mon Mar 05, 2018 11:33 am
I have 1 stock of BRK.B to get the Geico 8% discount. I bought it few week before @ 216 for 1 share which saves 32 bucks on my 6 months of insurance on my new CRV. I will be holding this one share since then. But not planning to sell that one share.
Since OP post is using the word - instead: I would say No I dont invest instead of SP500
We're with GEICO, and I hadn't heard of this benefit. If we were to purchase a share of BRK.B in taxable, how would I go about indicating this on the website/calling GEICO?
Call Geico and inform them - "you are a shareholder and heard Geico is giving discount for shareholders"
As soon as I mentioned above words, customer support told they will adjust the amount and process the discount refund
Just to clarify, I just called GEICO and asked for the discount. They said I would qualify for 5% discount on my auto insurance. To get 8%, I would have to be a government employee or retired government employee.
I just checked my discount and its mentioned as "Associate discount" and they issued close to 7% (6.89% accurately)
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner

sco
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by sco » Mon Mar 12, 2018 7:20 pm

You can buy the BRKB share in an Ira or 401k if allowed too.

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blaugranamd
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by blaugranamd » Tue Mar 13, 2018 5:32 am

I have always wondered if Berkshire Hathaway was a bit of a self fulfilling prophecy: owns billions in investments, Buffet is highly regarded so when he says things people follow suit that increases demand and price for investments, Buffet looks like a genius. :confused
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bgf
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by bgf » Tue Mar 13, 2018 8:10 am

blaugranamd wrote:
Tue Mar 13, 2018 5:32 am
I have always wondered if Berkshire Hathaway was a bit of a self fulfilling prophecy: owns billions in investments, Buffet is highly regarded so when he says things people follow suit that increases demand and price for investments, Buffet looks like a genius. :confused
there may be some truth to this in the very short term. for example, buffett has to be secretive about acquiring new positions as any breaking news would jack the price up in the short term. long term though, the business does what it does and share price follows.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

david1082b
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Re: Does Anyone Invest In Berkshire Hathaway Instead Of Index Funds?

Post by david1082b » Tue Mar 13, 2018 7:07 pm

blaugranamd wrote:
Tue Mar 13, 2018 5:32 am
I have always wondered if Berkshire Hathaway was a bit of a self fulfilling prophecy: owns billions in investments, Buffet is highly regarded so when he says things people follow suit that increases demand and price for investments, Buffet looks like a genius. :confused
The IBM trade didnt seem to have that effect. The stock went mostly sideways after the BRK stake was announced in late 2011, before a big slide into negative territory by early 2016. E.g. see this from 2013:
Big Blue's stock plunged 8.3 percent Friday to $190 per share after the company reported disappointing first quarter revenues.
https://www.cnbc.com/id/100657591

So standard market forces operate on BRK trades. BRK is just one player among many.

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