Berkshire Annual Meeting Notes – 1 (Gold vs. S&P 500)

By | May 7, 2018

Last year this time, we were at Omaha Nebraska participating the Berkshire’s annual investor meeting. This year there was a conflict for me over the same weekend, I had to resort to watching live broadcasting by Yahoo Finance instead, which is not entirely terrible either, considering the lack of hassle in travelling and fighting the crowds over limited resources in Omaha.

Over next few weeks, we will pick a topic that was discussed in the Q&A section of annual shareholders’ meeting.

Let’s begin with something easy to grasp: investing in gold versus investing in S&P 500 index fund.

$10,000 invested in gold in 1942 would have been worth approximately $400,000 today.

$10,000 invested in S&P 500 index in 1942, assuming no trading in and out of the index, would have been worth $51 milliontoday.

Practically you just needed to make oneinvestment decision: America is going to be doing fine in the long term to make that investment in S&P 500 index. And you don’t need to read a headline of Wall Street Journal, or listen to various pundits’ prediction of the market, or bother to read a single financial statement or learn any “technical analysis” or charting of the market. You just need to put down $10,000 in S&P 500, and then focus your attention to your life, job, family etc. Then when you are old and ready to draw something from that decision, you are surprised to find out you have $51 million in your account (of course, probably you will have about $10 million in taxes as well, which is lower than 2017 tax liability of $16 million).

If you are professional investor and are following the right approach, you may even pick the right set of stocks that outperformed S&P 500 (like BRK), which will make your wealth a lot higher than $51 million. But that’s a lot to ask.

The bottom line is, if you are philosophically right, you can become successfully in investing by following this one rule.

However, if you listened to your advisors along the way that ask you to put money in gold due to war, inflation, president assassinations, cold war, economic crisis, oil crisis etc. You end up with $400,000 versus the alternative scenario of $51 million. If you pay your advisors for those suggestions, you end up with less than $400,000.

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