Billionaire investor Warren Buffett has an incredible long-term track record in the stock market. Over the long term, he hasn’t just beaten the market – he’s smashed it.
Interested to know how much money I’d have today if I’d invested £10k with the stock market guru a decade ago? Let’s take a look.
Investing with a legend
It’s quite easy to invest with Buffett. That’s because his investment company, Berkshire Hathaway, trades on the stock market like regular shares do (it’s listed on the New York Stock Exchange).
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Now 10 years ago, Berkshire Hathaway Class B (NYSE: BRK.B) stock (Berkshire Hathaway has two classes of stock and this is the cheapest) was trading at $139. And the GBP/USD exchange rate at the time was roughly 1.63.
Today however, the share price is $460 and the GBP/USD exchange rate is 1.33.
What this means is that if I’d invested £10k in the stock a decade ago, I’d now have about £40,500.
Huge gains
Needless to say, that’s a pretty amazing result. I’d be very happy if I’d turned £10k into more than £40k in the space of a decade.
It’s worth noting that the weakness in the pound would have boosted my return significantly. It would have taken my overall return from about 230% to a little over 300%.
Even without that currency boost however, the return’s excellent. A gain of 230% over a decade translates to an annualised return of about 13%.
That’s around twice the return the FTSE 100 index generated over that period (note I’ve ignored trading commissions and platform fees in all of these calculations).
A good investment today?
Is it worth considering an investment in Berkshire Hathaway today?
I think so. I wouldn’t expect the same kind of returns over the next decade. After all, the US stock market (where Buffett invests a lot of his capital) has just had an exceptionally strong decade.
But I reckon the investment company has the potential to generate solid returns for investors going forward.
With this company, investors get exposure to a vast range of businesses across industries such as insurance (Buffett loves insurance), consumer goods, railroads, energy, and technology. And there are some brilliant companies in the portfolio including the likes of Apple, Coca-Cola, and Visa.
I actually see it as a great way to diversify an investment portfolio. Not only does it provide exposure to many different companies, but it also has a very different composition to mainstream equity indexes such as the FTSE 100, the S&P 500, and the MSCI World.
It’s worth pointing out that Buffett isn’t going to be running Berkshire Hathaway forever. Today, the investment guru’s 94 so realistically his successors are likely to be running the company in the not-so-distant future. This could have an impact on future returns.
Another risk for UK investors to consider is exchange rates. If the British pound was to strengthen against the US dollar, returns from this US-listed investment vehicle could be eroded.
However, I see it as an attractive long-term investment to consider.
