Warren Buffett’s Past Performance Makes Strong Case for Indexing

By on May 8, 2012

Warren Buffett - Chairman BRKBDavid Loeper, contributor to Forbes Magazine has written a compelling article highlighting the power of indexing; even compared to the “magic” of investing superstar Warren Buffett.

In “Has Warren Buffett Lost His Magical Touch?,” Loeper examines the 3 year and 10 year performance of Buffett’s Bershire Hathaway versus the Vanguard Total Domestic Equities ETF (VTI).

Loeper notes:

There were a number of stories late last week about how Berkshire Hathaway underperformed the S&P500 for the last three years, so I thought I’d delve a bit deeper into his returns. Not only has the stock dramatically underperformed the S&P500 and Vanguard Total Domestic Equities (VTI) over the last three years by 7.95% or more a year, but over the last decade, it underperformed VTI by 0.21%.

Loeper makes a strong case for indexing given the low costs and tax advantages. Although past performance isn’t an indicator of the future, VTI performed in the top 1% of funds in its peer group of large-cap blend funds for the last decade.

The efficiency of indexing is also evident in the performance of the SPDR S&P500 ETF (SPY). According to Morningstar the SPDR S&P500 ETF (SPY) performed in the top 1% of its large-cap blend peers over the last fifteen years.

Source: Forbes

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