A few days after Berkshire Hathaway’s annual letter to shareholders disclosed the company’s lowest annual profit since 2001, Warren Buffett appeared on TV to suggest that longer-term investment strategies like index funds still stand the test of time.

Buffett, who is estimated by Forbes to have a net worth of $84 billion, told CNBC that passive investing—typically investing in a mutual fund or exchange-traded fund that tracks a major stock index like the benchmark S&P 500—”makes the most sense practically all of the time.”



In Buffett’s letter to Berkshire Hathaway shareholders, published last weekend, he recalled his first investment, $114.72 that he’d been saving for years and invested in a natural-gas company when he was 11.

“If my $114.75 had been invested in a no-fee S&P 500 index fund, and all dividends had been reinvested, my stake would have grown to be worth (pre-taxes) $606,811 on January 31, 2019,” Buffett wrote. That is a gain of 5,288 for 1.”

Buffett said on CNBC that $10,000 invested in an S&P 500 index fund back in 1942 would be worth $51 million today. The index’s returns have been so strong that two of Berkshire Hathaway’s stock pickers, Ted Weschler and Todd Combs, recently failed to beat the S&P 500. “Overall, they are a tiny bit behind the S&P, each, by almost the same margin,” Buffett said.

Berkshire Hathaway recorded a $25 billion loss in the last quarter of 2018. Part of that has to do with its investment in Kraft Heinz, which recently took a $15.4 billion write-down on brands such as Kraft and Oscar Mayer. Buffett said he was “wrong in a couple of ways” about Kraft Heinz, including “overpaying” for the acquisition of Kraft.

This article was written by Kevin Kelleher from FORTUNE and was legally licensed by AdvisorStream through the NewsCred publisher network.

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Eric Lidemark, CLU, CFP, CHS
Certified Financial Planner
Lidemark Financial Group Inc.
(604) 538-6565