S&P 500 vs Berkshire Hathaway - Which is the better investment for your money? The S&P500 (SPY) and Berkshire Hathaway (BRK-A or BRK-B) are both great performers over the long term, but this video helps narrow down which one of the two I would personally pick as an investment.
The S&P500 is the 500 biggest companies in the US and it can be tracked by the ticker SPY. Berkshire Hathaway is a company - managed by Warren Buffet who is one of the greatest investors of all time. He arguably hand picked the best companies (43 public companies and also a bunch of private ones that they own 100% or close to 100% in such as Duracell, Fruit of the Loom, and Dairy Queen).
So say you believe that Berkshire's hand picked companies will outperform the S&P500 - what are some negatives of holding BRK? First you need to understand there's 2 versions - BRK.A and BRK.B. BRK.A is around $320,000/share and BRK.B is around $215/share. The main difference is BRK.B does not give you any voting rights in the company but most of us out there can't trade $320k/share anyways. So a big difference is Dividends - BRK does not pay a dividend ($0) whereas SPY pays a 1.7% div. Another is commission fees - a lot of brokers don't charge to buy/sell ETFs - so you save a bit with SPY here but BRK is a stock, so you are tied to your usual broker fees for stocks. If you have Robinhood, then this is negligible. The last negative I see is they don't really hold any growth companies - this is a compromise, as Buffet believes in companies like KO, AXP, JNJ - which are blue chip safe stocks. You don't get exposure to companies like Amazon and Google which are considered more growth-type companies.
Essentially, holding BRK.B is like trusting an expert financial adviser with your money - if you are one that loves investing in Mutual Funds, then BRK pretty much offers this, but with no management fees.
Now the most important question is - which has performed better?
Over last 1, 5, and 10 yrs, BRK has outperformed the SPY:
-1yr performance is 34% vs 24%
-5yr is 120% vs 88%
-10yr is 131% vs 113%
-And during the last recession from Dec 2007 to June 2009, both were roughly the same
-Spy was -38%
-BRK was -40%
So, should you buy the S&P or BRK? Since I'm not financial adviser, I can't say - but I personally feel better holding the S&P even though BRK did better performance wise. The reason is because I feel once Buffet steps down as CEO, there will be a lot of fear that the new CEO won't be able to truly replace him and this could cause the stock to dip, at least in the shorter term.
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Disclaimer: None of the stocks, options, or securities that I discuss should be taken as advice or recommendations to buy/sell/hold. The views and information presented in these videos is strictly for educational purposes and I will not be held liable for your gains or losses incurred due to trading, investing, or getting involved in the stock market.
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