AdrianC wrote: ↑Wed Nov 16, 2022 2:13 pm
Interview from 2014:
https://fm.cnbc.com/applications/cnbc.c ... script.pdf
BECKY: You also-- revealed something in the annual letter this year, where you said--
you laid out the terms of your will, what you've set aside for your wife. Which, I didn't
know any of this.
BUFFETT: Well, I didn't lay out my whole will. There's hope for some of you who
haven't been mentioned yet. The-- but I did explain, because I laid out what I thought
the average person who is not an expert on stocks should do.
And my widow will not be an expert on stocks. And- I wanna be sure she gets a decent
result. She isn't gonna get a sensational result, you know? And since all my Berkshire
shares are going-- to philanthropy-- the question becomes what does she do with the
cash that's left to her?
And I've been-- part of it goes outright, part of it goes to a trustee. But I've told the
trustee to put 90% of it in an S&P 500 index fund and 10% in short-term governments.
And the reason for the 10% in short-term governments is that if there's a terrible period
in the market and she's withdrawing 3% or 4% a year you take it out of that instead of
selling stocks at the wrong time. She'll do fine with that. And anybody will do fine with
that. It's low-cost, it's in a bunch of wonderful businesses and it takes care of itself.
Here's a link to the video if interested, the snippet transcribed above starts around the 8:59 mark.
https://buffett.cnbc.com/video/2014/03/ ... rview.html
He's pretty clearly saying he thinks anyone who is not an expert on stocks would do OK on this plan. The part about her withdrawing 3%-4% per year aligns with a 25x - 33x portfolio size, whatever the annual withdrawal amount is.
To add to this stock-heavy idea, read what he wrote in the 2011 letter on p.17 under the heading "The Basic Choices For Investors and the One We Strongly Prefer".
He lays out an argument that investments "denominated in a given currency includ(ing) money-market funds, bonds, mortgages, bank deposits, and other instruments ... are thought of as 'safe.' In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge".
I find this all to be a consistent viewpoint he has given over many years, and not intended for billionaires and rich heirs who can't possibly run out of money, but for BRK shareholders and TV viewers. He says in the 2011 letter that stocks are "by far the safest" in the long run compared to either currency-denominated or non-productive assets. That is, the big risk to worry about in investing is loss of purchasing power in the long run, and productive assets (businesses, farms, or real estate) are the only major category of investments that protect you from that risk. So if you believe stocks are actually by far the safest investments and bonds are actually hugely risky, then 90/10 makes sense. It's at least food for thought.