Investment guru, billionaire Warren Buffet, has an investment tip that anyone can bank on! When one of the world’s richest men provides free money tips, it’s worthwhile to pay attention.
Warren Buffett does so in the chairman’s letter contained in Berkshire Hathaway’s latest annual report, offering a strong vote of confidence for a blue-collar investment vehicle.
As with past Buffett essays, his most recent narrative, penned Feb. 25, provides valuable insights mixed with a prosaic discussion of Berkshire Hathaway’s operations. That’s part of Buffett’s literary style — spin yarns, go off on tangents, keep it simple.
Buried deep in the 27-page letter, Buffett recounted how he initiated a long-term wager nearly a decade ago and now has nine years of performance data that will determine who wins the bet. Back then, he staked $500,000 to support his view that a mutual fund holding stocks in the Standard & Poor’s 500 index would beat a representative sampling of hedge funds. Only one hedge-fund proponent, an investment manager named Ted Seides, took him up on it on the wager, choosing five portfolios that each invested in 20-plus hedge funds.
All performance results, the two agreed, would be measured net of fees, as is standard practice.
This was a blue-collar vs. white-collar proposition, a contest pitting a mainstream investment against portfolios reserved for the wealthy. Index mutual funds, open to anyone with a couple thousand dollars or less, are designed for the masses. Hedge funds, by contrast, are reserved for “accredited” investors — basically, people with incomes of $200,000 and up or net worths exceeding $1 million — and run by some of Wall Street’s sharpest minds.
With one year to go, barring a market meltdown, Buffett’s bet looks like a winner.
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