Key takeaways for you from the Berkshire Hathaway AGM

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The famed Annual General Meeting of Berkshire Hathaway was held last weekend. For the uninitiated, Berkshire Hathaway is a massive holding company many other famous companies like Fruit of the Loom, Duracell,  and a shareholder in Apple,UPS, etc. Let’s tell you some absolutely eye-popping? facts about Berkshire –   

• Each Class A share of Berkshire traded around $4,35,127 (as of  May 2021) or Rs 3.18 crores a share.
• This price is very close to the maximum share price that NASDAQ computers can handle.
• The overall return on Berkshire shares from 1965 to 2020 was 2,810,526% ( Do you see the beauty of being invested over the long-term? )

What’s happening here?

As many of you would know, Warren Buffet, the legendary value investor heads Berkshire. Each year investors gather at Berkshire’s AGM to hear Buffet and his partner Charlie Munger speak about their vision for stock markets, investing, and economies.

This year, due to COVID-related travel restrictions, the AGM was live-streamed exclusively on Yahoo Finance. Previously, it was held at Omaha and the AGMs came with a carnival-like atmosphere featuring comedy skits, disco balls, music, celebrities like Bill Gates, and even dancing characters from the various companies in the Berkshire portfolio, including the GEICO gecko. 

Although technically, AGMs are meant for shareholders of the company, Berkshire AGMs were open to anyone and are touted as the Woodstock for capitalists. During these meetings, Buffet and Munger, not only speak about the performance and prospects of Berkshire but take questions from investors and spend hours doing so. ( In 2019, it lasted for 5hours)

What are the key takeaways for you from this year’s AGM?

Though Berkshire is located in the US and invests primarily in the US markets, the pearls of wisdom given out by Buffet hold good for investors everywhere. Here are some of them-

Investing isn’t easy

Buffet said that investing isn’t easy.  He also added to say that average investors cannot pick stocks.  Picking the right stocks for investing takes a lot of research and analysis which might not be easy for average investors like you and me. You may not have the time, resources, and information needed to make these decisions. We aren’t talking about day trading here.

As an example, Buffet quoted that the biggest companies 30 years ago are totally different from what are biggest companies today. So, choosing a company to invest in goes beyond choosing the right industry said the legend. 

This statement from the legendary investor himself says a lot. So as regular investors, you may be better off choosing mutual funds where you gain from a lot of benefits than wasting time and efforts on choosing that one stock. 

Mistakes are made in investing. Accept and move on

Buffet accepted that buying stakes in four big US airline stocks in 2016 was a mistake and he doesn’t regret selling them last year, even though those airline stocks are up from their lows as the Covid situation stabilises with vaccination in the US. 

For investors, it is big learning here. It is human to err, but it pays to accept it, make amends and move on. If you realise that you have made wrong decisions about investing in a particular fund/stock, you may be better off selling them and take the right decisions later on. But these decisions should be made based on solid research or advice of a financial advisor rather than on tips on social media. 

The importance of having a bigger safety net

You must have seen the market capitalization and the share value of Berkshire shares, it is a massive company, yet Buffet insisting on having a bigger safety net. 

He had previously said that he would never let reserves of Berkshire fall below $20 billion. Buffet looked at increasing the number now as the company has grown. 

This is one of the biggest takeaways for anyone, the importance of having adequate reserves which change with changes in your lifestyle, the addition of a family member, etc. Do you remember last year’s layoffs and loss of income? Though this year we haven’t heard much of them, the impact of an individual getting affected by Covid or the loss of an earning member of the family can be much more. So always keep your reserves in place, and be insured (both life and health). 

Investing in S&P 500/Index

Warren Buffet is a long-time advocate of investing in the index. When asked whether he would advise anyone to invest in Berkshire or S&P 500, he said he would advise the individual to invest in the S&P 500 Index anytime in comparison to investing in his own company. Such is the power and simplicity of investing in Index!

There are enormous benefits of investing in the Index in comparison to an individual stock or an actively managed mutual fund. Maybe it’s time you let the index do the job for you while you sit back and relax.