Here’s a nice Reuturs article interviewing Warren Buffett and Charlie Munger shortly after the recent Berkshire Hathaway shareholder meeting.
On index funds and beating the market:
Warren Buffett said on Sunday most investors are better off putting their money in low-cost index funds, though he believes he can still outperform major market indexes.
“A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money,” Buffett said at a press conference, a day after the annual shareholder meeting for his Berkshire Hathaway Inc.
As for Berkshire, which ended March with nearly $90 billion of stock and fixed-income investments, Buffett said “we think we can do better than the S&P. I would be disappointed if our portfolio didn’t do a couple of percentage points better. I would be amazed if it did (much) better.”
I’m not sure if this is Buffett being humble, or he is admitting that beating the S&P by a large margin is getting harder and harder.
On performance chasing:
Charlie Munger, Berkshire’s vice chairman, said at the press conference that many investors actually fare worse in actively managed funds. He said many funds perform well when they’re small, but struggle to keep up when investors chase that early performance, and pour in cash.
“Successful funds attract a massive amount of money, and the later performance typically gets mediocre,” he said. “Then they keep publishing returns for the whole period for someone who started 20 years ago…. The reporting has falsehood and folly in it.”
If I believed in the “Buffett way”, which on some days I do, I would simply buy BRK directly rather than try to replicate or beat his results by trading on my own as a mere mortal.
By Jonathan Ping | Investing | 5/17/07, 3:01am