Question of the Day: How much would a $100 investment in Warren Buffet's company in 1964 be worth in November of 2020?

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Nov 11, 2020
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Investing, Question of the Day

Answer: About $2.8 million

The math:

  • From Berkshire Hathaway Annual Letter to investors: Overall gain from 1964 to 2019: 2,744,062% 
  • At end of 2019, that $100 would be worth $2,744,162
  • Berkshire stock performance (through 11/9/20): 0.87% bringing investment's value close to $2.8 million

Questions:

  1. Do you think it is easy/difficult to hold on to investments like this over the long-term? Explain.
  2. If you had the chance to meet Warren Buffett, what are two questions that you would ask him?
  3. Investors spend a lot of time looking for the next Warren Buffett. Do you think that is time well spent? Explain.
  4. Researchers often find that investors do vastly worse than if they had just made the simple choice to own an index fund (like the S&P 500). What might be some of the reasons they do so poorly?

Click here for the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (from Berkshire Hathaway Annual Report): 

  • Compounded annual growth rate (CAGR) of 20.3% for period 1965-2017. 
  • S&P 500 CAGR was 10.0% over that same period. 

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While the value of stock in Warren Buffett's company was driven by his stock picking prowess, Buffett has consistently told investors "do as I say and not as I do" in espousing the value of index funds. Here's his conversation with Lebron James where he provides an answer on how 99% of the population should invest. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.