Berkshire Hathaway vs. S&P 500: Which is better? Let’s see what Buffett and Munger have to say. Becky: This question comes from a long-time shareholder who has held Berkshire stock for 25 years. His name is Ben Nowell, from Minneapolis, Minnesota. His question is: Mr. Munger, Mr. Buffett, over the past 15 years, Berkshire has underperformed the market. You’ve become very cautious and no longer predict that Berkshire will outperform the market in the future. Given this, what should long-term Berkshire shareholders do? Should they continue holding Berkshire, or should they buy index funds to diversify risk? Buffett: Charlie, how about you take this one? Munger: Sure. Personally, I’d rather hold Berkshire than an index. I feel very comfortable holding Berkshire. Compared to a basket of companies in the market, the companies under Berkshire are better. Becky: Is that because you think the market hasn’t given Berkshire a fair valuation? Munger: Price fluctuations are just ripples in the tide of history. Stock prices are constantly moving up and down. I believe Berkshire, as a whole portfolio, can outperform the market’s index portfolio. Even after both of us are gone, Berkshire will still outperform. Buffett: Hmm. I do recommend index funds. Over the long term, I’ve always recommended S&P 500 index funds to people. Regardless of Berkshire’s stock price, I’ve never recommended Berkshire to anyone. If I recommend Berkshire, people might think I have insider information, and I don’t want anyone buying Berkshire because of that. But I’ve publicly recommended index funds many times. In my will, I’ve left a portion of funds for my wife—90% of it will go into an S&P 500 index fund, and 10% into government bonds. On the other hand, my wealth will be donated to charities over a 12-year period, and that wealth will remain in Berkshire. I’m very confident in that. I believe in Berkshire, but the average person doesn’t have stock-picking skills. Many Berkshire shareholders also don’t have stock-picking skills, but 50 or 60 years ago, they chose Charlie and let him manage their money. Berkshire has a very unique group of shareholders. They’ve been saving their entire lives through Berkshire. They feel secure. Even if they don’t look at it for 10 or 20 years, we’ll take good care of their money. I believe in Berkshire, but for someone who doesn’t know how to pick stocks and doesn’t have a special connection to Berkshire, it’s better to buy the S&P 500 index.