S&P 500 vs Total Market vs Berkshire Hathway???

[dcel22]

Looking to put money in the market. Not sure but was thinking to wait for the next recession though.

I think people favor a total market fund over s&p500. What about getting shares of Berkshire Hathaway though?  Just some real quick research was showing higher long term gains than the S&P500 I believe.

Excited to hear what the Mustaschians have to say!  Thanks!

[slappy]

Mustachians say not to time the market.

[frugaliknowit]

How many Berkshire shares were you looking to buy?  They are about $295,740.00 each...

What is your timeframe for the investing?

[dcel22]

How many Berkshire shares were you looking to buy?  They are about $295,740.00 each...

What is your timeframe for the investing?

I was thinking 1 share.  Possibly 2.  Thinking to invest any time after May 1st but was thinking to try to "time the market" since it is so high right now and we have to be due for a recession.

[dcel22]

Mustachians say not to time the market.

Even with how high the market is now?

[dandarc]

Mustachians say not to time the market.

Even with how high the market is now?

Yes.

[slappy]

Mustachians say not to time the market.

Even with how high the market is now?

Yes.

Yes

[Bicycle_B]

Berkshire "pro" arguments:
1. No dividends, no income taxes!  Until you sell.  Or until they change the no-dividend policy.  Which they may do sometime, Buffet hinted (IIRC).
2. If you buy a "real" share (Berkshire Class A), you can attend the Berkshire annual stockholders' meeting, aka the Woodstock of Capitalism.  Only A holders can go.
3. If A shares are a bit steep (as they are for me), you can buy Class B shares  for about $200 each.  You get all the financial benefits of A shares proportionally, plus the ability to sell shares in small numbers to meet cash needs.
4. Long term orientation might provide sustainable edge over normal stocks.
5. Different organizational style, dividend policy and internal approach provide diversification compared to regular stocks.
6. Buffett claims his chosen successors will do a great job after he's gone and the wonderful managers will keep going.
7. Uncle Warren is the best capitalist ever and should be trusted from the grave!

Berkshire "con" arguments:
1. It's a conglomerate, it won't outperform forever.
2. No dividends.  Can't value it as income provider.
3. Class A shares too big to sell conveniently. 
4. If it does outperform, a Class A's growth will distort a small portfolio.
5. Actually, it's gathering so much cash it may start issuing dividends.  Uncertainty, plus tax hassles.
6. When Uncle Warren dies, stockholders will bail out, leaving you with a loss. 
7. When Uncle Warren dies, his successors will be less good, some of the managers will leave, and sustained returns will drop.
8. Due to its insurance operations' "float", Berkshire has a lot of disguised leverage.  If it goes bad, it could go real bad, underperforming the market.

No idea which set of arguments is right.

[frugaliknowit]

How many Berkshire shares were you looking to buy?  They are about $295,740.00 each...

What is your timeframe for the investing?

I was thinking 1 share.  Possibly 2.  Thinking to invest any time after May 1st but was thinking to try to "time the market" since it is so high right now and we have to be due for a recession.

By timeframe, I meant how LONG are you planning to hold the investment?  10 years+? 

[dcel22]

How many Berkshire shares were you looking to buy?  They are about $295,740.00 each...

What is your timeframe for the investing?

I was thinking 1 share.  Possibly 2.  Thinking to invest any time after May 1st but was thinking to try to "time the market" since it is so high right now and we have to be due for a recession.

By timeframe, I meant how LONG are you planning to hold the investment?  10 years+?

I was thinking at minimum 5-10 years.  Not sure exactly how long though.

[dcel22]

Berkshire "pro" arguments:
1. No dividends, no income taxes!  Until you sell.  Or until they change the no-dividend policy.  Which they may do sometime, Buffet hinted (IIRC).
2. If you buy a "real" share (Berkshire Class A), you can attend the Berkshire annual stockholders' meeting, aka the Woodstock of Capitalism.  Only A holders can go.
3. If A shares are a bit steep (as they are for me), you can buy Class B shares  for about $200 each.  You get all the financial benefits of A shares proportionally, plus the ability to sell shares in small numbers to meet cash needs.
4. Long term orientation might provide sustainable edge over normal stocks.
5. Different organizational style, dividend policy and internal approach provide diversification compared to regular stocks.
6. Buffett claims his chosen successors will do a great job after he's gone and the wonderful managers will keep going.
7. Uncle Warren is the best capitalist ever and should be trusted from the grave!

Berkshire "con" arguments:
1. It's a conglomerate, it won't outperform forever.
2. No dividends.  Can't value it as income provider.
3. Class A shares too big to sell conveniently. 
4. If it does outperform, a Class A's growth will distort a small portfolio.
5. Actually, it's gathering so much cash it may start issuing dividends.  Uncertainty, plus tax hassles.
6. When Uncle Warren dies, stockholders will bail out, leaving you with a loss. 
7. When Uncle Warren dies, his successors will be less good, some of the managers will leave, and sustained returns will drop.
8. Due to its insurance operations' "float", Berkshire has a lot of disguised leverage.  If it goes bad, it could go real bad, underperforming the market.

No idea which set of arguments is right.

Thank you for the feedback!  I appreciate it! :)

[Rubic]

How many Berkshire shares were you looking to buy?  They are about $295,740.00 each...

Berkshire "B" shares (NYSE: BRK.B) closed today at $191.42.

Very few retail buyers purchase the "A" shares anymore -- unless
they just want bragging rights.

[Telecaster]

BRK's out performance of the past is unlikely because it is so large is it almost has become the market.  Just like the Dow 30 tracks the S&P500 pretty well.   It is almost like a subset.  And over the last few years the price performance has indeed been about the same.

However, over the last few years the price/book of BRK has been increasing slightly faster that the market as a whole, which suggests BRK is decent value stock at the moment.  And after the hammering it took this month, it looks even better.   BRK is big enough that you can think of it like an actively managed mutual fund, only without the fees.  Not a crazy thing to buy a bit, IMO. 

And don't try to time the market. 

[Yankuba]

Don’t we all own BRK via our index funds?

[dcel22]

I get that no one is going to be able to time the market but what is the reasoning to put money in the market now?  My thinking is that the S&P500 should give roughly 10 percent over the long run, including recessions. It's been 10 years since the recession. It seems like if I am truly investing for 5 years then I could very likely realize the drop and have to ride out extra time to make up for those losses. My thought process is if I wait for us to actually be in a recession the market should be lower than it is today.  Not saying I'm right or anyone else is. Just curious on why people feel so strongly on getting in now opposed to waiting. Thanks again!

[Telecaster]

I get that no one is going to be able to time the market but what is the reasoning to put money in the market now?  My thinking is that the S&P500 should give roughly 10 percent over the long run, including recessions. It's been 10 years since the recession. It seems like if I am truly investing for 5 years then I could very likely realize the drop and have to ride out extra time to make up for those losses. My thought process is if I wait for us to actually be in a recession the market should be lower than it is today.  Not saying I'm right or anyone else is. Just curious on why people feel so strongly on getting in now opposed to waiting. Thanks again!

The stock market isn't the economy for one.  And you might be waiting five years for the next recession.  Who knows?  The last one was pretty deep, so it stands to reason the recovery will be long. Which it has been, but it has also been slow.  And it is entirely possible the market just sort of goes sideways for five years and never drops down to your entry point.   Part of the skepticism is that we've been seeing posts like yours for years.  Lots of people were positive the drop was just around the corner, and they missed out on some serious gain.  There is a drop out there some where.  Shoot, we've seen one this week.  Might continue, might not.  No way to tell. 

However, if your time frame is only five years, stocks are kind of an iffy investment in the first place. 

[Indexer]

If you are willing to pay almost $300,000 to share in Buffett's bright ideas, why not just ask him?

Buffett's opinion on the subject:

"Both large and small investors should stick with low-cost index funds."  2016

"The 21st century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners — neither he nor his 'helpers' can do that — but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index  fund will achieve this goal." 2013

"By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals. Paradoxically, when 'dumb' money acknowledges its limitations, it ceases to be dumb." (1993)

"Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades. A major reason has been fees: Many institutions pay substantial sums to consultants who, in turn, recommend high-fee managers. And that is a fool's game."" (2014)

"A low-cost fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth." (To John Bogle, in The Little Book of Common Sense Investing)

Want to own Berkshire... it's in your index funds.

[aceyou]

My thought process is if I wait for us to actually be in a recession the market should be lower than it is today. 

Please consider reconsidering the word should.  Check the Dow out from 1900 to now and I think you will reach a different conclusion.  What the market SHOULD do is continue to go up up up, with occasional dips, and then go up, up, and up some more.  That's what the market does.  It could be lower than it is today, but it could also double again over the next 4 years, and the next recession might not even get close to where it is today.  History says the latter is more likely. 

[ooeei]

https://forum.mrmoneymustache.com/investor-alley/top-is-in/

That's the current running popular thread on someone calling that the market is at its top and about to crash. It was started a year ago. Someone posted awhile back a list of these threads, they crop up every month or two it seems. People have been talking about an imminent stock market drop for the last 5 years at least.

Eventually the market will drop, or go sideways. Obviously you should sell before that time. The hard part is predicting when that will happen, because NOBODY can do it consistently. People get lucky occasionally, sure, but don't fool yourself into thinking you are a fortune teller more talented than the pros on wall street and the 1000's of other investors like you who get it wrong all the time.

Unless you're investing a lifetime amount of money like lottery winnings or an inheritance, dump it all in right now. If you are investing something life changing consider a more conservative allocation if you're worried about a drop.

http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

http://theirrelevantinvestor.com/2016/01/15/what-if-you-were-the-worlds-best-market-timer/

[Proud Foot]

Yes BRK has outperformed the S&P500 in the past (17.08% vs 11.17 CAGR since May 1985), but has slightly trailed since January 2008 (8.53 vs 8.90). In my opinion they are now at the size and cash flow is large enough they are not able to find those investment opportunities to really boost returns like they have in years past. Anymore I see it similar to a manged fund but without any additional fees. Plus they give you exposure to many private companies you wouldn't be able to invest in otherwise.

[sisto]

I bought more S&P 500 yesterday. I've never been lucky with timing the market. I usually end up with the worst possible timing, but I still just do it. In the long run it goes up up up as Aceyou already pointed out.

[markbike528CBX]

Berkshire "pro" arguments:.......
2. If you buy a "real" share (Berkshire Class A), you can attend the Berkshire annual stockholders' meeting, aka the Woodstock of Capitalism.  Only A holders can go.......

All BRK.A and BRK.B can go to the meeting.

http://www.berkshirehathaway.com/meet01/2018Meetinginfo.pdf

[Bicycle_B]

Ah, I see.  Thanks for letting us know.

[HawkeyeNFO]

Thinking to invest any time after May 1st but was thinking to try to "time the market" since it is so high right now and we have to be due for a recession.

Why will the prices drop after May 1st?  This does happen often, but often times it does not. 

Why are we due for a recession?

[TheAnonOne]

Do not time the market. TIME IN THE MARKET is key.

You'll end up being that guy from 2014 who thought "we are at the top" and is MUCH poorer because of it. Even if you drop it in, and the very next day is '08 all over again. You will be even in <5 years and double your money in 1 decade.

What usually happens, is people wait the market goes up 30% and drops 10%, they buy and think they got a good deal. Missing dividends and the 30% run in the process.

[ERock]

You might find this article interesting to read:
https://www.marketwatch.com/story/heres-why-buffett-is-told-his-wife-to-buy-index-funds-rather-than-berkshires-stock-2017-05-06

[phred]

The graphs for total market and S&P 500 look almost the same since S&P 500 makes up 84% (?) of total market.  A typical S&P 500 has some Berk in it