2011: How should an investor choose between Berkshire and a mutual fund?
AUDIENCE MEMBER: Good morning, Mr. Munger and Mr. Buffett. This is Mary Bundrick (PH) from Rochester, Minnesota.
I was wondering, what factors would you consider in deciding between investment in Berkshire Hathaway versus a no-load mutual fund?
WARREN BUFFETT: Well, I advise people to buy index funds, actually, if they’re not going to be active in investments.
I mean, if you just are going — if you’ve got a day job, and you want to just put money aside over time, I think the average individual will do better buying an index fund consistently over time than almost anything else available to them.
I think it will be a perfectly satisfactory investment. It won’t be — it’ll never be regarded as a great investment, but it will be a perfectly satisfactory investment.
If I personally had a choice between an index fund and Berkshire at present prices, I would rather own Berkshire. But I wouldn’t be unhappy if you told me I had to leave all my money in an index fund for the rest of my life and then — but I like Berkshire better. (Laughs)
CHARLIE MUNGER: Well, I like it a lot better, and I’d be very unhappy if I had to own an index fund. My ambitions are larger.
I don’t think the average return of a skilled investor over the next 50 years is going to be as good after all factors as it was over the last 50 years.
So I think reduced expectations are the best defense any investor has, and after that, I think Berkshire is a pretty good bet.
WARREN BUFFETT: Charlie’s big on lowering expectations.
CHARLIE MUNGER: Absolutely. (Laughter)
That’s the way I got married. (Laughter)
My wife lowered her expectations. (Laughter)
WARREN BUFFETT: And he lived up to them. (Laughter)