If Buffet is "world's most successful investor" then why do his stocks only have modest returns?

Berkshire Hathaway hasn't really outperformed the market by that much........

if you look at the graph and compare them to the S & P 500......there are some ups, some downs,

it doesn't consistently outperform the S & P 500 year after year.

and look at what Buffet's portfolio is made of:

Coca Cola,

IBM,

Johnson & Johnson,

Proctor and Gamble,

USBAnkcorp,

These companies post MODEST returns. These aren't companies that significantly out performed the market over several years.

He also has stock in WPO The Washington Post - and that one hasn't come close to recovering from the recession.

Yet Warren Buffet gets this reputation as "The world's most successful investor" ---- why?

how is he the most successful investor when his stocks perform quite modestly compared to the overall market?

2 Answers

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  • M
    Lv 6
    7 years ago
    Favorite Answer

    Here is a chart of Berkshire Hathaway's stock performance vs the S&P 500 stock index since 1990:

    http://finance.yahoo.com/echarts?s=BRK-A+Interacti...

    As you can see, Berkshire Hathaway has increased in stock price compared to the S&P 500 (stock market average) by a factor of more than 4:1. This is pretty impressive. In fact, Warren Buffett's average investment performance with Berkshire Hathaway since he took control of the company nearly 50 years ago has been about 20% - almost double the performance of the stock market averages. Buffett is famous not only for his great performance, but for his ability to consistently beat stock market averages over the long term.

    Buffett grew up in a middle class family, his wealth was created almost entirely from his own investments - today he is one of the top 10 wealthiest individuals on the planet.

    The trick to Buffett's success isn't that he buys companies that produce huge returns - in fact, as you said, most of his positions only earn modest returns. The trick to his success is that he buys these companies at the right time - when they are trading for low prices. He later sells them at higher prices. Simple as that.

  • Anonymous
    7 years ago

    Warren Buffet's wealth does not come from stock. He is a venture capitalist. He buys companies that are in the tank, strips them down to basics. When they recover, he sells them for huge profits. His stock are just like nice added income.

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