http://www.nytimes.com/2013/02/11/business/wave-of-investor-...Complex Investments Prove Risky as Savers Chase Bigger PayoffBy NATHANIEL POPPERNew York Times: February 10, 2013 Regulators across the country are confronting a wave of investor fraud that is saddling retirement savers with steep losses on complex products that until a few years ago were pitched only to the most sophisticated investors. The victims are among the millions of Americans whose mutual funds and stock portfolios plummeted in the wake of the financial crisis, and who started searching for ways to make better returns than those being offered by bank deposits and government bonds with minuscule interest rates.Tens of thousands of them put money into speculative bets promoted by aggressive financial advisers. ...The money that retail investors have in alternative investments in the United States, ranging from baskets of commodities to mutual funds that employ sophisticated trading, more than doubled from 2008 to 2012, to $712 billion from $312 billion, according to McKinsey & Company. Many of the products hold out the promise of higher returns while ostensibly being immune to the volatility of stock markets. ... [end quote]Private business placements and nontraded REITs are among the most dangerous.However, all investors should remember that nobody can beat the Fed and the markets over a long span of time. Rising reward entails rising risk.Anyone who says that they have a system to get higher-than-market reward without higher-than-market risk -- hang up the phone as fast as possible because the salesman is getting paid to set a trap for you...even if he somehow believes his own story line.Wendy
Wendy: "However, all investors should remember that nobody can beat the Fed and the markets over a long span of time. Rising reward entails rising risk."Is 21 years a long span of time?http://finance.yahoo.com/echarts?s=BRK-A+Interactive#symbol=...
Is 21 years a long span of time?A point of quick clarification. The chart you use is biased since Yahoo only shows price change and not reinvested dividends. When you compare BRKA (which does not pay a div) to something like the DOW, but then exclude the dividend, it will always make the DOW look worse.Use Morningstar instead as it will reflect the DOW dividends reinvested.When you do that, BRKA is still better but not by 1000+%.BRK indeed beat the DOW by 0.93% average over the last 15 years, but it lagged the S&P MidCap 400 by 2% average over the last 15 years.http://performance.morningstar.com/stock/performance-return....And, since BRKA is up an average of just 1% over the last 5 yrs, Wendy's comment about the Fed retains merit.
I accept the criticism that total return is a better way to measure it.And I accept your Morningstar chart for 15 years rather than try to figure out total returns for 21 years. That being said, it looks like Buffetts total return for 15 years not only beat the dow, it also beat the S&P 500 by 2.34 over the same 15 years. Is there any reason you selected only the midcap 400 for comparison?
BRK indeed beat the DOW by 0.93% average over the last 15 years, but it lagged the S&P MidCap 400 by 2% average over the last 15 years. WEB has become more interested in his legacy than stock picking. There was a time back before 1999 when WEB's stock picking within the SP 500 was phenomenal. Today he is interested in how long BRK can last without him. Picks like IBM are the sure things. BNI in some ways more of a property company is a phenomenal pick longer term as are investments in MidAmerican, but what starts out as a $40 billion bet in a bear market does not show multibagger returns for decades. In BNI, IBM and MidAmerican's cases BRK will receive fantastic dividends forever, but not massive capital gains over the next two decades. A simple value fund from Vanguard will probably well out perform BRK over the next fifteen years. Mainly because the small and medium caps have much more room for gain. Dave
Is there any reason you selected only the midcap 400 for comparison? Yes, to show contrast as the DOW and S&P are both primarily large cap and of course the S&P 400 is MidCap.
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