Author Topic: Investing instructions in Warren Buffet's will for his wife's inheritance  (Read 7008 times)

gojiberries

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From his 2013 letter to shareholders (pg20) http://www.berkshirehathaway.com/letters/2013ltr.pdf


"My money, I should add, is where my mouth is: What I advise here is essentially identical to certain
instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s
benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to
certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee
could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P
500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to
those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee
managers."

Rufus.T.Firefly

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Buffet is awesome.

nobodyspecial

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Unless you are a current shareholder in Berkshire Hathaway
Isn't he saying that he expects it to do less well than the market average when he dies?

Doesn't that mean the future value of BBK.A is now  $0 ?

Vagabond76

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Anyone thinks Buffet is the "Worlds Greatest Investor" and tries to mimic his success is sorely mistaken.  Berkshire makes the vast majority of its money selling insurance policies.  The "float" is like an interest-free loan that the company uses to invest in stocks or divert to purchase or run other businesses.

LordSquidworth

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Unless you are a current shareholder in Berkshire Hathaway
Isn't he saying that he expects it to do less well than the market average when he dies?

Doesn't that mean the future value of BBK.A is now  $0 ?

It has nothing to do with Berkshire stock.

It's what he wants done with the money he leaves his wife. He doesn't care about performance, he cares about her having enough. By putting it in an index, he's doing his best to make it "idiot" proof so he doesn't have to worry about it being mismanaged, as too often it does in those situations.

He has no idea what will happen to Berkshire after he dies. The S&P 500 index fund, he can better plan on following the path it's been following.

Anyone thinks Buffet is the "Worlds Greatest Investor" and tries to mimic his success is sorely mistaken.  Berkshire makes the vast majority of its money selling insurance policies.  The "float" is like an interest-free loan that the company uses to invest in stocks or divert to purchase or run other businesses.

Buying insurance companies was a part of his plan from early on. He recognized the power of the float and sought to take advantage of it.

AdrianC

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It has nothing to do with Berkshire stock.

Exactly. He was asked about it and said Berkshire stock would be fine too. He doesn't like to talk up Berkshire stock.

And let's face it, his wife will have very, very much more than enough with the 2% dividends from the S&P500.

We can, of course, invest like Buffett...by buying Berkshire shares. Berkshire stock has trounced the S&P500 over the last 10 and 15 years.

MustacheAndaHalf

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In a way it's showmanship because of the amounts involved.  Leaving his wife even 1% of his fortune is hundreds of millions of dollars - to a woman with a life expectancy (I'm guessing) less than 20 years.  It just won't be spent, regardless of how it's invested.  She could live off the 10% invested in short-term money market funds.

As an aside, though, maybe Buffet knows that when he's gone from Berkshire, it won't be a good time to see what they do next.  :)

A more interesting note on Buffet and inheritance is that he's avoided leaving his fortune to his children.  It's going to charity (Bill & Melinda Gates Foundation).

dodojojo

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I agree, investing 90% in a stock index and only 10% in bond index isn't going to hurt Mrs. Buffet in any which way.  But I wouldn't invest that same ratio for my mother as my total investment worth is way, way less than a million dollars. If the stock market cratered by 50%, that would severely impact my mom's already minimal income.

Metric Mouse

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It has nothing to do with Berkshire stock.

Exactly. He was asked about it and said Berkshire stock would be fine too. He doesn't like to talk up Berkshire stock.

And let's face it, his wife will have very, very much more than enough with the 2% dividends from the S&P500.

We can, of course, invest like Buffett...by buying Berkshire shares. Berkshire stock has trounced the S&P500 over the last 10 and 15 years.

And the 20 year AND the 25 year returns. But, of course, Indexing is ALWAYS better than value investing, until you run the numbers...

nobodyspecial

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Rufus.T.Firefly

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It has nothing to do with Berkshire stock.

Exactly. He was asked about it and said Berkshire stock would be fine too. He doesn't like to talk up Berkshire stock.

And let's face it, his wife will have very, very much more than enough with the 2% dividends from the S&P500.

We can, of course, invest like Buffett...by buying Berkshire shares. Berkshire stock has trounced the S&P500 over the last 10 and 15 years.

And the 20 year AND the 25 year returns. But, of course, Indexing is ALWAYS better than value investing, until you run the numbers...

What Buffet can do is totally different than what your typical investor can achieve. Part of Buffet's strategy is to purchase entire companies and make them better by changing their strategy, hiring better management etc. So he really should have better returns than those of us who have no real oversight or control over our investments.

nobodyspecial

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And he has an insurance company effectively providing an interest free fund to do this with

hedgefund10

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Of course he gets better returns than the average joe, he gets deals that only you and I could dream of. Also, not sure how Berkshire isn't SIFI, when Metlife is. Berkshire is more important since it is in the reinsurance business

Metric Mouse

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I think the point was if one invested in Berkshire Hathaway they would have outperformed the market for a 20 year investment cycle. Not that one should become the next Warren Buffet; just that it is possible to buy well-known companies that consistently outperform indexes over decades.

Vagabond76

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What Buffet can do is totally different than what your typical investor can achieve. Part of Buffet's strategy is to purchase entire companies and make them better by changing their strategy, hiring better management etc. So he really should have better returns than those of us who have no real oversight or control over our investments.

I'm no Buffet fan, but that is not what he does. Suggest you read his annual letters to find out what he does with the companies that Berkshire wholly owns.