The Best Investor in the World

The market goes up, on average, in 3-out-of-4 years.  The “perma-bear” who consistently preaches of doom and gloom is forgotten each day until he is right, then they put him on the news and ask how he “called” the top of the market.  How?  Well, probably because he’d been “calling it” every day, for the last decade.  Then there are legends, like Warren Buffett, who many consider to be the best investor in the world – and with a nickname like “The Oracle of Omaha,” how could anything else be true?!  Want to find out?  Read on…


Let’s start with the Mortgage Crisis, “The Great Recession,” the 2007-09 market crash… whatever you want to call it.  Over this time period, the S&P500 (which we’ll call “the market”) was down almost -58%.  As you can see below, Buffett (Berkshire Hathaway) was down about -55% from top-to-bottom.

Now let’s move on to the first scare in the market after the crash, which took place in 2011, due to the U.S. Treasury downgrade.  Now, understand that the downgrade didn’t take place until late-summer, which was when the market’s wheels started to come off.  Yet, Buffett’s stock struggled earlier, for longer, and in the end, its decline of -24% was worse than the market’s -19.9% drop.


Traveling in time, to one of the roughest, 2-year periods in recent history was the 2015-16 “double whipsaw.”  This was a time when the market dropped more than -12% in 2015, then between fall of ’15 and winter of ’16, it dropped again to the tune of about -13%.  In the end, the market was down roughly -14% from top-to-bottom and went nowhere for almost two years.  Below, you can see that, during this same time period, Buffett’s stock never got the bounce that the market did, causing underperformance and a total loss of almost -19%.

Scanning forward to present day, we can see how Buffett’s stock has done in the current environment, and we find that it’s pretty gone nowhere in 18 months.  While the stock market as a whole hasn’t been anything to run laps around the block about, it’s up just over 6% as I finish up this column.

So, what’s the point of all this?  It’s definitely not to disparage the Oracle of Omaha, that’s for sure.


I have two points, actually:


First, to prove that, even those considered to be the best investors in the world are not necessarily knocking it out of the park, and


Secondly, to suggest that the vast majority of what you hear – from friends, neighbors, co-workers, and even family – is mostly just noise.  I call it “The Country Club Effect.”


Whenever someone tells you how great their portfolio is doing (especially if they’re managing it themselves), be skeptical.  Everyone wants to be a winner, whether they’re teeing off on the 1st hole, or bragging about their supposed gains in their retirement portfolio.


And by the way, this includes you!  You want to be a winner, too, and you certainly don’t want to look or feel silly in front of your friends and family.  So, when you hear someone might be doing better than you, the immediate psychological response is to become defensive.


In reality, even if your friends aren’t Warren Buffett, maybe they’re not doing as well as we think they are.  Instead, stay focused on the long-term, because your focus is something that you can control.


We want to participate in the healthy up-markets.  Even when rainstorms come along, just like the one we’re living through right now, it’s just a rainstorm.  Tornadoes on the other hand, those we want to avoid…and when the sirens go off, we’ll take our retirement portfolios to the basement in order to avoid catastrophic loss, knowing that a tornado might not even touch-down.  But we’re okay with that.


Retirement planning is a marathon, not a sprint.  Don’t worry about what other people are doing, even if they are considered to be the best investor in the world.


Till next time…


Categories: Adam Koos, CFP®, CMT®, Market Commentary

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