Motley Fool - Sat Apr 27, 4:09AM CDT
Warren Buffett is one of the most talented investors in history. So when he makes a recommendation, it's usually worth listening to.
That's why investors should pay careful attention to his suggestion about the best investment for the vast majority of us. It's an asset he's not only spoken in favor of buying, but also one that his holding company, Berkshire Hathaway, owns.
What is this great investment? Here are the details.
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Here's where Buffett believes your money should go
"In my view, for most people, the best thing to do is own the S&P 500 Index fund," Buffett said in 2020. And the following year, he made it even clearer: "I recommend the S&P 500 index fund, and have for a long, long time to people. And I've never recommended Berkshire to anybody."
Buffett has taken his own advice as well. Berkshire Hathaway owns two such exchange-traded funds (ETFs): the SPDR S&P 500 ETF Trust(NYSEMKT: SPY) and the Vanguard S&P 500 ETF(NYSEMKT: VOO).
Why Buffett's tip is such a good one
Why is an S&P 500 index fund such a great choice for Berkshire and for the vast majority of investors?
That's because it's simple and as close to risk-free as you can get if you're investing over the long haul. The S&P 500 is made up of around 500 large U.S. stocks. When you buy an ETF like SPDR's or Vanguard's version that's designed to track the performance of the index, you pay very low fees since there's no active management involved. And you get to own a very tiny piece of all the 500-plus companies on the list.
Many of these companies are household names, and there's a good mix of them across all different industries. You're essentially buying into big American businesses and betting on the U.S. economy as a whole. In fact, the performance of the S&P is widely considered to be a barometer of how the whole stock market is doing.
Because of the way such an ETF works, you are diversified with a single investment, and you stand a very solid chance of making a good profit over the long term. For decades, the S&P 500 has returned average annual returns of around 10%, and no one who left money in this fund for 20 or more years has ever walked away with losses.
The index has also consistently outperformed the majority of actively managed funds that you would pay a lot more in fees to invest in.
So, why not make your life simple, follow Buffett's advice, and buy an ETF that is almost assuredly going to make you a winner in the market over the long term? You can purchase shares of the Vanguard S&P 500 ETF or the SPDR S&P 500 ETF Trust from pretty much any brokerage firm -- and get your money into the market so it can start working for you.
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Christy Bieber has positions in SPDR S&P 500 ETF Trust. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
FAQs
Key Takeaways. Berkshire Hathaway Class A is the company's original stock offering, known for its stratospheric price per share. Berkshire Hathaway Class B shares, first issued in 1996, are more modestly priced and have a correspondingly modest share of equity value in the company.
What is the Class A symbol for Berkshire Hathaway stock? ›
BRK. A | Berkshire Hathaway Inc.
Why is Berkshire Hathaway Inc Class A so expensive? ›
One of the biggest reasons why BRK. A is so expensive is because CEO Warren Buffett has decided against a stock split. A stock split is when a company splits its existing stock to create more shares, often resulting in a lower share price.
Is it better to buy Berkshire A or B? ›
Berkshire created two share classes in 1996 to make investing more accessible. Both share classes offer essentially the same exposure to the company's success. Most investors are better off sticking with Class B shares for their flexibility and affordability.
Who owns most of Berkshire Hathaway Class A shares? ›
Warren Buffett is the largest holder of Berkshire Hathaway (BRK. A 0.58%) (BRK. B 0.38%) stock. He owns around 227,416 shares of Class A stock, and 276 shares of Class B stock.
How many brk b equal brk a? ›
One class B share (BRK.B) is equivalent to 1/1500 of a class A share (BRK. A).
Who is the owner of Berkshire Hathaway? ›
Berkshire Hathaway is a holding company run by Warren Buffett that owns a diverse range of private businesses and significant minority interests in public companies such as Apple.
What is the most expensive stock in the world? ›
Explore 5 most expensive stocks in the world
Berkshire Hathaway Inc.: Are you amazed to see Warrant Buffet's company at the top of the list of most expensive stock? Yes, this consumer goods conglomerate is the world's most expensive stock, which has a current market price of US$ 630500.
What is the intrinsic value of BRK? ›
As of 2024-05-24, the Intrinsic Value of Berkshire Hathaway Inc (BRK.B) is 439.70 USD. This BRK. B valuation is based on the model Discounted Cash Flows (Growth Exit 5Y). With the current market price of 405.88 USD, the upside of Berkshire Hathaway Inc is 8.3%.
What are the cons of Berkshire Hathaway? ›
Berkshire Hathaway doesn't pay dividends
In the comparison to the S&P 500 Index above, the performance figures include reinvested dividends. That is a benefit for the S&P 500, but has no impact on Berkshire Hathaway's performance because the company doesn't pay a dividend.
Just know that a $250 investment is no longer even possible. The company's B shares -- its cheapest share class -- now trade at around $400. If you can meet that minimum investment, putting the money into Berkshire still makes a ton of long-term sense. Ryan Vanzo has no position in any of the stocks mentioned.
Why is BRK worth so much? ›
While its main business is insurance, much of Berkshire's value comes from its investment portfolio. Chairman and CEO Warren Buffett has generated incredible market-beating returns for shareholders through prudent long-term buy-and-hold investing. Today, Berkshire's portfolio is worth about $361 billion.
Does BRK B outperform S&P? ›
Historical Performance
Berkshire Hathaway: Has historically outperformed the S&P 500 over the long term under Warren Buffett's leadership. However, past performance doesn't guarantee future results.
Does brk a pay a dividend? ›
Buffett loves stocks with dividend, but Berkshire doesn't pay one — Here's why.
Will brk b split again? ›
Presently, with Berkshire's Class B stock trading at $357 per share, the level of affordability seems reasonably manageable, meaning investors should not anticipate a stock split from Berkshire in the near future.
Can I buy Berkshire Class A shares? ›
Yes, you can buy shares of Berkshire Hathaway in a brokerage account. The company has two stock symbols: BRK. A and BRK. B.
What is the difference between Class A and B shares? ›
Class A shares generally have more voting power and higher priority for dividends, while Class B shares are common shares with no preferential treatment. Class C shares can refer to shares given to employees or alternate share classes available to public investors, with varying restrictions and voting rights.
Why invest in BRK-A? ›
Key Points. Berkshire delivers solid returns with less volatility. It owns a high-quality portfolio of companies and publicly traded stocks. Buffett's company has a massive cash position that it can use to capitalize on opportunities in the next downturn.
What is the annual return of Berkshire Hathaway stock Class A? ›
Profitability
| Metric | BRK.A | ALL |
|---|
| Return on Assets (Normalized) | 3.90% | 1.41% |
| Return on Equity (Normalized) | 7.49% | 9.70% |
| Return on Invested Capital (Normalized) | 6.61% | 6.92% |
