No. of Recommendations: 16
[i[ I expected a response like this... and of course some of my funds are in an index but far less than my Berkshire holdings.
The reason it is relative is the Index IS the option Warren recommends for the average person. I get he doesn't want to "promote" Berkshire even though Charlie was fine doing so. [/i]
Indeed, BRK and Warren have themselves directed shareholders to SPY as a relevant benchmark, and it gets a little tedious when the concern is simply hand-waved away as effectively irrelevant.
Perhaps one thing the recent past has illustrated is that future returns for either SPY or BRK, from any random point, (1) may not diverge by that much for very long periods of time (I find their proximity to each other re: returns more interesting than the neck and neck of who's winning) and (2) may be in SPY's favour for very long stretches. I won't be surprised if this continues in the future, particularly given BRK's current size.
That said, one reason I keep coming back to buying, and sometimes selling, BRK over SPY or equivalents is the simple fact that BRK is far easier to understand than the broader indices. It's a collection of profitable businesses, and one can simply evaluate BRK on its actual performance, and what that says about likely future performance, as opposed to what it might be doing ten years from now.
So if its cheap, I buy, sometimes with leverage. If its not, I hold, sell, or de-leverage. I may not know exactly when its cheap or expensive, but being roughly right has allowed me to have about double the returns as compared to BRK's market performance for over a decade now. All this without ever knowing whether 'the market' is selling too richly or too cheaply at any given time.
