“The Big Bet” With Warren Buffett
Each year, Warren Buffett provides a fabulous read when he releases his annual letter to shareholders. That annual letter is filled with information about Berkshire Hathaway, but the more interesting sections for many folks are the investment stories and anecdotes from the so-called sage of Omaha
In the 2016 edition, one of the primary stories deals with Buffett’s challenge to active management. Nine years ago Buffett made a public bet of $500,000 stating that the S&P 500 would beat the cumulative or average returns of the hedge fund industry over a ten year period of time. Only one fund manager was willing to come forward and take the bet.
The bet is now heading into its final year with hedge funds trailing very badly. At this point, the S&P 500 and Buffett’s charity stand to win the big bet.
On the program this week, I spend time going through the story, the results and in Buffett’s own words the multiple problems of active management. It is a cautionary tale worth the time.
Here is a link for you if you would like to read the entire Berkshire Hathaway annual letter to shareholders. Berkshire Hathaway Annual Shareholder Letter
The Problems With Hedge Funds
Later in the program I speak about my own concerns with hedge funds. Ultimately, I don’t think hedge funds are a good investment or bet for most people. The cost structure, the lack of transparency and the lack of liquidity are major stumbling blocks in my opinion.
Based on what I have seen over the years, most people would be better off in much simpler, low cost, liquid and transparent investments. Less is often more in the investment world. That rings true to me with costs.
I hope you enjoy the podcast this week.
All the best – Gary
Do you have a question for Gary? Do you need help with your investments? The best way to reach Gary is by emailing him at firstname.lastname@example.org.