Another Warren Buffett S&P 500 Recommendation

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FIREchief
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Re: Another Warren Buffett S&P 500 Recommendation

Post by FIREchief » Sun May 12, 2019 11:50 pm

272 Sheep wrote:
Sun May 12, 2019 10:26 pm
Hi FIREchief, My reponse below:
FIREchief wrote:
Sun May 12, 2019 8:56 pm
protagonist wrote:
Sun May 12, 2019 5:57 pm
So Buffett has instructed his wife's trustee to put 90% of his legacy into an S+P index fund? NOT Berkshire-Hathaway???
This is somewhat of a goof. I've only heard him quoted as "recommending" this to the trustee. If that's all it is, then I believe that most/all states' prudent investor laws would require the trustee to adopt a more diversified investment strategy. The only way around that is if the trust specifically requires that 90/10 allocation.
Not a goof. Buffett has specifically said he will invest in Vanguard S&P 500 Index fund, 90%. Has said he will practice what he preaches.
Buffett says he has great respect for Bogle who was invited and recognized at most recent Berkshire meeting. Because of this, Vanguard has had
(2017-2018) massive cash in-flows on new investor money.
The other10% will be allocated to short-term Gov't treasuries. Of course you already know that vast majority of his fortune will be going to charity?
Best,
Carl W.
I think you may have missed the point. Buffet can and will certainly invest his vast fortune in any way he chooses. Once he's dead, any remaining fortune left in trust will be invested in accordance with the terms of the trust and state laws. "Recommendations" really don't enter into the equation. If the trust stipulates 90% S&P 500 index fund and 10% treasuries, then that will be what his trustee has to follow. If the trust is the standard "broad discretion" investing terms, then a trustee will invest in a manner that will protect them from the state's prudent investor laws. This would likely be some 60/40ish high fees approach that makes money for the trustee and his/her employer.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Ferdinand2014
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Re: Another Warren Buffett S&P 500 Recommendation

Post by Ferdinand2014 » Mon May 13, 2019 8:30 am

If you read his shareholder letters from 2013, 2017 and 2018 he outlines very specifically his recommendation for the S&P 500 and short term U.S. Treasuries. He specifically recommended vanguard although he pointed out any low cost S&P 500 index fund. The shareholder letters I mentioned specifically address the ‘bet’ against protege the hedge fund organization and also what he recommends for not only his wife, but the vast majority of investors from ‘savings minded individuals’, to pension funds to endowments. He discusses interest rates and stock returns with detail. The amount of treasuries he describes as anywhere from 10% to whatever amount lets you sleep at night. He also does not say anywhere that this approach will outperform international, or any other cap weighting etc. he simply points out it will do very well over time and that it is better then paying high fees or trying to time the market. It’s what he recommended to Lebron James, family and friends and average investors in the U.S. It’s also clear -and he says so- that bonds, especially long term bonds are a poor choice. He discusses liability matching by bond term that many pension funds and insurance companies do is a risky and poor choice. He does point out as well that there have been rare times when he has owned longer duration bonds, but in very different interest rate environments then now.

dbr
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Re: Another Warren Buffett S&P 500 Recommendation

Post by dbr » Mon May 13, 2019 8:51 am

^^^^ agrees with my understanding of Buffett. It really is as simple as that from his point of view.

Interestingly I read in the Charlie Munger interview that he sees the prospects for BRK to be that it will "outperform the S&P 500 by a little bit." In short just buy the S&P 500 for the typical individual investor (in the US).

272 Sheep
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Re: Another Warren Buffett S&P 500 Recommendation

Post by 272 Sheep » Mon May 13, 2019 10:20 am

Last 15 years, Berkshire-Hathaway has underperformed S&P 500!

protagonist
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Re: Another Warren Buffett S&P 500 Recommendation

Post by protagonist » Mon May 13, 2019 12:09 pm

272 Sheep wrote:
Sun May 12, 2019 10:26 pm
Hi FIREchief, My reponse below:
FIREchief wrote:
Sun May 12, 2019 8:56 pm
protagonist wrote:
Sun May 12, 2019 5:57 pm
So Buffett has instructed his wife's trustee to put 90% of his legacy into an S+P index fund? NOT Berkshire-Hathaway???
This is somewhat of a goof. I've only heard him quoted as "recommending" this to the trustee. If that's all it is, then I believe that most/all states' prudent investor laws would require the trustee to adopt a more diversified investment strategy. The only way around that is if the trust specifically requires that 90/10 allocation.
Not a goof. Buffett has specifically said he will invest in Vanguard S&P 500 Index fund, 90%. Has said he will practice what he preaches.
Buffett says he has great respect for Bogle who was invited and recognized at most recent Berkshire meeting. Because of this, Vanguard has had
(2017-2018) massive cash in-flows on new investor money.
The other10% will be allocated to short-term Gov't treasuries. Of course you already know that vast majority of his fortune will be going to charity?
Best,
Carl W.
Even if just a small portion of his vast fortune goes to his family, IMHO the 90/10 diversified stock index fund/US Treasuries is still a great way for somebody with that kind of fortune to assure his family stress-free wealth. The performance of the market may or may not make them richer but either way they are securely rich for life via the treasuries.

My approach is similar in retirement, though I do not have anywhere near that kind of wealth. I keep enough money in CDs and I-bonds for survival and the excess (which unfortunately is not 90% in my case) in the market as a gamble. It makes me feel good that Buffett shares the same strategy, even though we are nowhere close in terms of wealth.

ohai
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Re: Another Warren Buffett S&P 500 Recommendation

Post by ohai » Mon May 13, 2019 12:56 pm

272 Sheep wrote:
Mon May 13, 2019 10:20 am
Last 15 years, Berkshire-Hathaway has underperformed S&P 500!
Buffet missed the run up in Amazon, FB, and all those growth stocks he misjudged or did not understand. You can't be right all the time.

Regarding S&P 500 specifically... I did not get that impression that Buffet likes this one better than any other similar index. He just used this example because it was the most common. If you told him use VTI or something instead, he'd probably say that is ok too.

protagonist
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Re: Another Warren Buffett S&P 500 Recommendation

Post by protagonist » Mon May 13, 2019 5:32 pm

ohai wrote:
Mon May 13, 2019 12:56 pm
272 Sheep wrote:
Mon May 13, 2019 10:20 am
Last 15 years, Berkshire-Hathaway has underperformed S&P 500!
Buffet missed the run up in Amazon, FB, and all those growth stocks he misjudged or did not understand. You can't be right all the time.

Regarding S&P 500 specifically... I did not get that impression that Buffet likes this one better than any other similar index. He just used this example because it was the most common. If you told him use VTI or something instead, he'd probably say that is ok too.
Not to second guess him but I think that is probably true. Whether the S+P 500 beats a broader US index, or a world stock index, or whatever over the course of time is probably more a matter of luck than anything else. That is just my opinion...I don't have anything substantial to back it up....but (other than a small amount of past data) neither does anybody else. He has more faith in US stocks than international stocks, and maybe he knows something there that I don't know, but either way, the basic message resonates with me. I read his message basically as saying...for the vast majority of people (including his wife), don't bother picking stocks, just reasonably diversify , don't waste morer money on management fees than is necessary, and maintain enough money in very safe vehicles to provide a buffer through unpredictable hard times. That is the closest we can come to guaranteeing a secure future in the face of the unknown.

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JoMoney
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Re: Another Warren Buffett S&P 500 Recommendation

Post by JoMoney » Mon May 13, 2019 7:04 pm

ohai wrote:
Mon May 13, 2019 12:56 pm
... If you told him use VTI or something instead, he'd probably say that is ok too.
Now we're repeating things already covered earlier in the thread, but in an interview he explicitly said so
Ben Stein interviewing Warren Buffett wrote: http://archive.fortune.com/2010/10/18/p ... /index.htm
What should a typical upper-middle-class person in the U.S. buy to prepare for retirement?

"Equities," Buffett answers without a moment's hesitation.

"The VTI?" I ask.

"That's good enough..." (then continues with some other possible recommendation regarding dividend stocks, then dismisses that)
But when it came to making his bet against the 'Hedge Funds' and for the bequest to his wife, he explicitly chose Vanguard's 500 Index Fund (VFIAX).
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

protagonist
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Re: Another Warren Buffett S&P 500 Recommendation

Post by protagonist » Tue May 14, 2019 2:40 pm

I just read the following on some website:
"Obviously a few market professionals have indeed been able to beat the market averages over a sustained period of time. Warren Buffett is frequently cited as an example, and there is no doubt his record is distinguished — over 20% compounded per annum return for 40 years running.

On the other hand, almost all of his outsize gains were made in the 1970s and 1980s. If we look at the record, say, of Buffett’s Berkshire Hathaway-B stock from its inception in May 1996 through March 2017, the average compounded annual gain was 9.9%, which is greater than the S&P500 index (8.3%), but not dramatically so. What’s more, over the past nine years BRK-B’s return has been only 6.2%, underperforming the S&P500 (7.1%) by nearly one percentage point. So was Buffett’s performance in the 1970s and 1980s merely a statistical outlier?"

Is this accurate?

If so, that may go a long way to explaining why Mr. Buffett wants to invest his wife's money in an index fund these days.

A decade or so ago I briefly considered investing in Berkshire Hathaway instead of an index but went with the index. I guess I made the right decision, or I should say, more accurately, at least it worked out well for me.

272 Sheep
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Re: Another Warren Buffett S&P 500 Recommendation

Post by 272 Sheep » Tue May 14, 2019 10:12 pm

According to below article he hasn't beat S&P 500 in 15 years.
https://www.marketwatch.com/story/no-on ... 2019-05-03
I don't think Buffett's accomplishments are a statistical outlier. I think Buffett is a great and genuinely talented, brilliant investor who has a record second to none and over a very long period of time. He and Munger along with Berkshire-Hathaway have matured. In a sense B-H, due to its very large size, has become like the S&P 500 itself!
When B-H was smaller and nimbler and Buffett, younger and hungrier is when they made outsized gains.
Its inevitable that superb long-term records will eventually come to an end. Joe DiMaggio's 56 game hitting streak came to an end, I don't think
it diminished his overall accomplishments a single bit, Personally, I don't think Buffett is stressed about it. What more does he have to prove? And to whom? Nobody. What? He is going to prove he can make more money? Especially after he's given almost all of it away? I think he is enjoying his later years doing what he loves best. Ya know what else? He's still not done yet and could surprise all of us!
But if he did, would we all really be surprised?
Carl W.

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