Tags: Updegrave | retirement | Buffett | Berkshire

Retirement Expert Updegrave: Don't Put All Your Retirement Savings in Buffett's Berkshire

By    |   Friday, 20 March 2015 06:00 AM

Warren Buffett's Berkshire Hathaway has generated an annualized total return of 10.2 percent during the last 15 years, dwarfing the S&P 500's 4.4 percent return.
 
So should you put all your retirement eggs in Buffett's Berkshire basket? No, says Walter Updegrave, editor of RealDealRetirement.com.
 
"I have no problem with you owning Berkshire shares," he writes in an article for CNNMoney.
 
But, "I don't think it's a good idea to invest too much of your retirement savings into Berkshire. As a rule, it's not wise to concentrate more than 10 percent or so of your stock holdings in the shares of any single company."
 
And why not bet the farm on Buffett?
 
"If you're going to make any single investment the cornerstone of your stock holdings, that investment ought to be very broadly diversified," Updegrave explains. While Berkshire does have a wide range of holdings, he adds, "it doesn't have the breadth of a total stock market index fund."
 
Then there's the question of how much longer Buffett, 84, will be around. "I'm not suggesting the whole shebang will fall apart post-Buffett. But it's an open question as to whether its extraordinary success will continue," Updegrave writes.
 
So what should investors do? "Build a portfolio of low-cost broadly diversified stock and bond index funds or ETFs [exchange-traded funds] that jibes with your appetite for risk," he recommends.
 
Meanwhile, Financial Times columnist Michael Skapinker says other CEOs would do well to use Buffett as a good for how to deal with their own slip-ups.
 
"One business leader who has no problem detailing his mistakes is Warren Buffett. He regularly does it in his annual letter to shareholders," Skapinker writes.
 
"This year's marked the golden anniversary of his and Charlie Munger's control of Berkshire Hathaway so he dredged up 50 years of mistakes. They included investing in dying textile companies and seeing acquisition 'synergies' evaporate."
 
A recent example is Berkshire's investment in the troubled British grocer Tesco. But Buffett doesn't let himself off the hook, citing "thumb-sucking," "childish behavior," and "I simply was wrong."
 
Acknowledgement of mistakes is important, because it allows executives to reduce them and to make clear that business isn't easy, Skapinker explains.

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Warren Buffett's Berkshire Hathaway has generated an annualized total return of 10.2 percent during the last 15 years, dwarfing the S&P 500's 4.4 percent return.
Updegrave, retirement, Buffett, Berkshire
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2015-00-20
Friday, 20 March 2015 06:00 AM
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