Warren Buffett remains one of the most famous investors. But his long-term performance isn't keeping up with his reputation.
Returns from nearly 30 of the 96 actively traded U.S. diversified ETFs in the past 15 years topped Buffett's Berkshire Hathaway, says an Investor's Business Daily analysis of data from Morningstar Direct. Berkshire Hathaway's return even trailed Invesco QQQ Trust and SPDR S&P 500 ETF Trust in that period.
This comes as a surprise as the point of owning shares of Buffett's holding company is to outperform major indexes. Investors can jump on indexes like the Nasdaq 100 and S&P 500 by simply buying a low cost ETF. Additionally, Buffett just turned 94 and his holding company continues to make big moves. Berkshire Hathaway is the latest S&P 500 company to be worth $1 trillion. Just weeks ago, Berkshire Hathaway unloaded half its stake in Apple, which has been its largest position.
Buffett shows how hard it is to beat S&P 500 ETFs, even if you're a famous investor. And Buffett knows it, too, as SPDR S&P 500 ETF Trust is one of Berkshire Hathaway's own holdings.
"Buffett was a believer in investing in S&P 500 funds for their simplicity and low costs," said Todd Rosenbluth, head of research at TMX VettaFi. "He understood that it was hard to pick the right companies to own but if you owned 500 of them consistently you would have great success."
Buffett Lagging The Indexes And S&P 500?
It wouldn't be as surprising to see Buffett lag flash-in-the-pan ETFs tied to temporarily hot themes. But he's trailing major market indexes over a long period of time.
Take Invesco QQQ Trust. The $275 billion-in-assets ETF is the No. 1 performing U.S. broad ETF in the past 15 years. The ETF owns the 100 largest nonfinancial stocks on the Nasdaq. It has returned north of 19% annualized in that period. That trounces the 13.95% annualized return of Berkshire Hathaway in that time.
But it's not just a lucky period for the Nasdaq. Invesco QQQ returned 19.99% and 17.4% annualized in the past five and 10 years, respectively. Those top Berkshire Hathaway's 17.1% and 12.8% returns in those periods.
Not Just S&P 500 Tech
Some might think comparing Buffett to the Nasdaq is unfair. He famously prefers stocks with a value tilt.
But that's the most surprising part. Berkshire Hathaway also lagged the S&P 500's 14.2% annualized return over the past 15 years. It's important to note, though, Berkshire Hathaway edged out the S&P 500 in the past 10- and five-year periods.
With that said, though, Buffett did own technology and growth stocks, too. And ETFs that focused on large growth stocks did even better in nearly all periods. Vanguard Growth ETF topped Berkshire Hathaway's returns in the past five, 10 and 15 years.
Better Than Buffett?
It's fair to point out Buffett's Berkshire Hathaway is so large now it's harder for it to find deals large enough to matter. Additionally, he's not picking stocks with Charlie Munger anymore.
Some ETFs are trying to use indexes, though, to follow Buffett's formula. Van Eck Morningstar Wide Moat taps Morningstar's stock research to find durable companies, Rosenbluth says. American Century US Quality Value is trying a similar approach.
Yet others use human stock pickers to find enduring companies. One is Davis Select US Equity. It owns a top 10 position in none other than Berkshire Hathaway, plus large cap growth stocks like Amazon.com and Meta Platforms.
But Berkshire Hathaway itself shows how hard it is to top the S&P 500. "Even skilled managers have difficulty repeating success consistently and there's often a high cost to work with them," Rosenbluth said. "Low cost broad market index ETFs can be great building blocks for a portfolio."
Top Returning U.S. Diversified ETFs
With active trading
| Name | Ticker | Total 15-year return annualized |
|---|---|---|
| Invesco QQQ Trust | QQQ | 19.02% |
| Fidelity Nasdaq composite | ONEQ | 16.79 |
| Vanguard Mega Cap Growth | MGK | 16.54 |
| iShares Russell 1000 Growth | IWF | 16.41 |
| Vanguard Growth | VUG | 16.07 |
| Fidelity Enhanced Large Cap Growth | FELG | 16.00 |
| iShares Morningstar Growth | ILCG | 15.80 |
| SPDR Portfolio S&P 500 Growth | SPYG | 15.77 |
| iShares S&P 500 Growth | IVW | 15.55 |
| Invesco S&P MidCap Momentum | XMMO | 15.43 |
| Berkshire Hathaway* | BRKA | 13.95 |
