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Fun Master Series

Why not Berkshire for stock investments

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I know no broker offer this as an option in IRA. But how about buying Berkshire (BRK.A, BRK.B) over mutual funds in a taxable brokerage account? Not only does Berkshire has a track record which beats almost all mutual fund (21.4% annual compound return in last 42 years) and the 10.4% annual return of S&P 500. See this Buffett’s 2006 letter for details. But also an investor get the service of the best investor with virtually no fees: Buffett is paid a salary of 100,000. So why don’t we all give the money to Buffett, rather than mess up with our own investments, which in most cases can not beat Buffett’s performance in long term.

I can think of the following reasons:

1) We think it’s harder and harder for Buffett to repeat the performance he had in last 42 years. It’s practical because as much as Buffett is getting better (he is a life long learner), his portfolio is growing so big that expecting an annual return of 20% is impossible.

Also keep in mind Buffett is 78 years old. We know he is healthy and his mind is still very sharp. But 78 is still considered old age in our society. The big unknown is who will take over Buffett for his dual CEO and CIO role in Berkshire.

2) Performance aside, I think some people just like the fun of picking stocks. I know I am one of those people. For that reason, I hold all stocks for my taxable account, no mutual funds.

3) Besides the fun, I also want to learn investing myself, and hopefully getting better as time goes. In the past I was simply speculating and hope I would be the lucky one: betting on IPOs and ERs blindly, following the news etc. I had loss in year 2004 and 2005, not to mention comparing to benchmark. But things started to turn around in year 2006 and 2007, as I started reading and learning. Hopefully I can continue to get better in the CFA journey.

Otherwise, I will try to find the next Berkshire 🙂

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