Let me remind everyone that the conclusion of this article is very important.
Investors need to know the difference
This article is to look at Buffett portfoion return rate from another perspective. Many people who have studied U.S. stocks or Buffett in depth must have a question in their mind for a long time (if you don’t have this question, you had better figure it out) ──── the returns of Buffett’s investment portfolio, Berkshire stock price, S&P 500, the difference among these three over the years.
Buffett’s algorithm
Buffett disclose his return on investment every year at the beginning of his annual Berkshire shareholders letter, but in fact you need to know somthing there:
- The return on investment he reports is the market price per share of Berkshire, which is the fourth column of the table below, not the return on investment of Berkshire’s stock portfolio, which makes a big difference. Because Berkshire’s investment portfolio currently only accounts for about 1/3 of Berkshire’s entire company assets.
- He reported annual returns of the S&P 500 include dividends, which is the third column of the table below.
What else do investors need?
I believe many investors want to know what the annual return on investment of Buffett’s Berkshire stock portfolio is. That is exactly the purpose of this article. I sorted it out and listed the table below.
| Year | Buffett’s stock portfolio | S&P 500 index | Berkshire market value per share |
| 1965 | 0.00% | 10.00% | 49.50% |
| 1966 | 0.00% | -11.70% | -3.40% |
| 1967 | 0.00% | 30.90% | 13.30% |
| 1968 | 0.00% | 11.00% | 77.80% |
| 1969 | 0.00% | -8.40% | 19.40% |
| 1970 | 0.00% | 3.90% | -4.60% |
| 1971 | 0.00% | 14.60% | 80.50% |
| 1972 | 0.00% | 18.90% | 8.10% |
| 1973 | 0.00% | -14.80% | -2.50% |
| 1974 | 0.00% | -26.40% | -48.70% |
| 1975 | 0.00% | 37.20% | 2.50% |
| 1976 | 0.00% | 23.60% | 129.30% |
| 1977 | -6.77% | -7.40% | 46.80% |
| 1978 | 5.62% | 6.40% | 14.50% |
| 1979 | 17.05% | 18.20% | 102.50% |
| 1980 | 29.60% | 32.30% | 32.80% |
| 1981 | -3.26% | -5.00% | 31.80% |
| 1982 | 21.09% | 21.40% | 38.40% |
| 1983 | 19.96% | 22.40% | 69.00% |
| 1984 | 6.99% | 6.10% | -2.70% |
| 1985 | 29.49% | 31.60% | 93.70% |
| 1986 | 17.29% | 18.60% | 14.20% |
| 1987 | 4.71% | 5.10% | 4.60% |
| 1988 | 15.17% | 16.60% | 59.30% |
| 1989 | 29.38% | 31.70% | 84.60% |
| 1990 | -2.00% | -3.10% | -23.10% |
| 1991 | 28.35% | 30.50% | 35.60% |
| 1992 | 7.36% | 7.60% | 29.80% |
| 1993 | 9.53% | 10.10% | 38.90% |
| 1994 | 1.01% | 1.30% | 25.00% |
| 1995 | 34.91% | 37.60% | 57.40% |
| 1996 | 21.03% | 23.00% | 6.20% |
| 1997 | 30.52% | 33.40% | 34.90% |
| 1998 | 26.49% | 28.60% | 52.20% |
| 1999 | 19.15% | 21.00% | -19.90% |
| 2000 | -7.27% | -9.10% | 26.60% |
| 2001 | -10.04% | -11.90% | 6.50% |
| 2002 | -19.13% | -22.10% | -3.80% |
| 2003 | 25.87% | 28.70% | 15.80% |
| 2004 | 9.73% | 10.90% | 4.30% |
| 2005 | 5.58% | 4.90% | 0.80% |
| 2006 | 14.32% | 15.80% | 24.10% |
| 2007 | 6.30% | 5.50% | 28.70% |
| 2008 | -32.35% | -37.00% | -31.80% |
| 2009 | 24.66% | 26.50% | 2.70% |
| 2010 | 14.55% | 15.10% | 21.40% |
| 2011 | 1.43% | 2.10% | -4.70% |
| 2012 | 14.59% | 16.00% | 16.80% |
| 2013 | 29.44% | 32.40% | 32.70% |
| 2014 | 12.08% | 13.70% | 27.00% |
| 2015 | 0.96% | 1.40% | -12.50% |
| 2016 | 10.69% | 12.00% | 23.40% |
| 2017 | 19.83% | 21.80% | 21.90% |
| 2018 | -3.84% | -4.40% | 2.80% |
| 2019 | 28.46% | 31.50% | 11.00% |
| 2020 | 19.19% | 18.40% | 2.40% |
| 2021 | 24.59% | 28.70% | 29.60% |
| 2022 as of today | -19.61% | -19.46% | -7.90% |
| IRR (annual rate of return) | 11.27% | 10.50% | 20.10% |
Closing words
From the table I compiled above, we can know that by the end of 2021:
- The annualized return on investment of Buffett’s portfolio is 11.27%, and I believe this is the number that many investors want to know.
- Berkshire’s share price has an annualized return rate of 20.1%, and that’s the number you see on the media.
- The annualized return on investment for the S&P 500 is 10.5%, and that’s a figure that includes dividends.
After writing this article, I am even more convinced that “starting a business can make far more money than investing in stocks”. Please read my sentence carefully, because the annualized return rate of the former is 20.1%, and the latter is 11.27%.
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