{"id":21610,"date":"2020-02-05T11:54:49","date_gmt":"2020-02-05T11:54:49","guid":{"rendered":"https:\/\/adamfayed.com\/?p=21610"},"modified":"2025-03-16T13:45:18","modified_gmt":"2025-03-16T13:45:18","slug":"warren-buffett-vs-sp500","status":"publish","type":"post","link":"https:\/\/adamfayed.com\/it\/uncategorized\/warren-buffett-vs-sp500\/","title":{"rendered":"Warren Buffett vs S&P 500 – is he losing his way?"},"content":{"rendered":"

For decades, Warren Buffett’s Berkshire Hathaway has beaten the S&P 500<\/a>, hands down.<\/p>\n\n\n\n

That has changed in recent times as the graph below shows:<\/p>\n\n\n\n

\"Warren
Source Atlas<\/sup><\/sub><\/figcaption><\/figure>\n\n\n\n

This article will discuss the main reasons for this change in recent times.<\/p>\n\n\n\n

    \n
  1. First – the issue of scale.<\/strong><\/li>\n<\/ol>\n\n\n\n

    Buffett himself has admitted that it is now tough for him to beat the S&P given the size of Berkshire Hathaway<\/a>.<\/p>\n\n\n\n

    One reason is how big the company now is. It is much harder to get 10% on a large company, than 25% on a smaller company – which Berkshire Hathaway was in the 1960s. <\/p>\n\n\n\n

    2. Who is he competing against?<\/strong><\/p>\n\n\n\n

    In the 1960s and 1970s, most of the investors in the market were individuals. Teachers, doctors, lawyers, the milkman and others.<\/p>\n\n\n\n

    Individual investors would often buy on emotion, and still do. So you could more easily find bargains.<\/p>\n\n\n\n

    These days, however, most of the S&P 500 players are institutional ones – banks, hedge funds and other firms.<\/p>\n\n\n\n

    As the graph below shows, they now make up over 80% of the money in the S&P 500:<\/p>\n\n\n\n

    \"S&P
    Most markets are now dominated by firms and not individual investors<\/sup><\/sub><\/figcaption><\/figure>\n\n\n\n

    What does this mean for the average investor?<\/strong><\/p>\n\n\n\n

    You are unlikely to beat the S&P 500 by picking stocks you “like” or “have researched”.<\/p>\n\n\n\n

    There are millions of companies out there, researching the same data you and I have.<\/p>\n\n\n\n

    If you want to actually have a chance to beat the market, you are likely going to have to:<\/p>\n\n\n\n