2021: Why should investors hold Berkshire over an index fund?

BECKY QUICK: This question comes from a long-term shareholder who’s been here for more than 25 years. His name’s Ben Knoll. He’s from Minneapolis, Minnesota.

And he says, “Mr. Munger and Mr. Buffett, after a 15-year period of market underperformance, you’re cautious about predicting Berkshire being able to outperform the market in the future.

“Given this, what do you see as the arguments for long-time shareholders to continue holding their stock versus diversifying their risk across an index?”

WARREN BUFFETT: Charlie, you want to answer that?

CHARLIE MUNGER: Well, sure. Well, I personally prefer holding Berkshire to holding the market, so —

BECKY QUICK: Because?

CHARLIE MUNGER: I’m quite comfortable holding Berkshire. I like — I think our businesses are better than the average in the market.

BECKY QUICK: Is it because you don’t think the market values it fairly?

CHARLIE MUNGER: Well, these are just accidents of history and things are fluctuating at all times.

But on a composite basis, I’d bet on Berkshire over the market. And that’s assuming we’re all dead.

WARREN BUFFETT: B, I recommend — I recommend the S&P 500 index fund — and I have for a long, long time — to people.

And I’ve never recommended Berkshire to anybody. Because I don’t want people to buy it because they think (laughs) I’m tipping them into some — never. I mean, no matter what it was selling for.

And, you know — I’ve made it public, you know — on my death, there’s a fund for my then-widow, and 90% will go into an S&P 500 index fund and 10% in Treasury bills.

On the other hand, I’m very happy having my future contributions to a group of charities, that’ll be spread over 12 years or so after my death, to stay in Berkshire.

I think the odds are — Berkshire is — you know, I like it, but I’m not —

I do not think the average person can pick stocks. We happen to have a large group of people that didn’t pick stocks, but they picked Charlie and me to manage money for them 50 or 60 years ago.

And so we have a very unusual group of shareholders, I think, who look at Berkshire as a lifetime savings vehicle, and one they don’t have to think about, and one that, you know, if they don’t look at it again for 10 or 20 years, that will have taken care of their money reasonably well.

But that — I wouldn’t argue that the S&P 500, over time — I would — I prefer — I like Berkshire.

But I think that the — a person who doesn’t know anything about stocks at all and doesn’t have any special feelings about Berkshire, I think they ought to buy the S&P 500 index.