Warren Buffett Just Dumped These 2 Investments — Should You Do the Same?
Written by
Jennifer Taylor
Edited by
Rebekah Evans
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When Warren Buffett makes an investment move, people notice. Since “the Oracle of Omaha” is largely considered one of the savviest investors of all time, it’s only natural to consider emulating him.
Moneywise reported that in March, SEC filings from Berkshire Hathaway revealed the company sold its entire stake in two electronically traded funds (ETFs): the Vanguard S&P 500 ETF(VOO) and SPDR S&P 500 ETF Trust(SPY). Buffett’s company had owned these low-cost ETFs for years, so this move raised eyebrows.
Buffett didn’t publicly comment on his decision to offload these funds. However, if you happen to own a stake in either — or both — of these funds, you might be wondering if you should also sell.
GOBankingRates spoke with two financial experts to speculate on what could have inspired Buffett’s sell decision. Keep reading to find out what they had to say, so you can decide if you should hold your positions or follow suit.
Buffett Isn’t Hindered by Time or Volatility
Investors often try to mimic Buffett’s moves, but fail to achieve the same effect for two reasons, said Shawn Perkins, certified financial planner (CFP), accredited wealth management advisor (AWMA) and founder of Genuine Wealth Solutions.
First, Buffet and Berkshire Hathaway have an infinite time horizon, which means that they care very little about the short-term — and sometimes violent — swings in the markets,” he said. “Most individual investors do not have this luxury.”
Additionally, he said Berkshire Hathway’s investment moves aren’t revealed until after they’ve been made — sometimes months later.
“By then, the value captured or strategic position by Berkshire may have already passed, leaving investors in position to buy or sell at an inopportune time,” he said. “As for the March sale of the S&P, perhaps Buffet saw a turbulent market ahead, which indeed happened and decided to trim [and/or] reinvest his capital elsewhere.”
Alternately, he said Buffett may have just been doing some housekeeping on his portfolio.
Glean Insights, But Don’t Always Mimic
“Either way, investors should listen to Buffet’s wisdom regarding long-term optimism for investing, but should think carefully before mimicking his actions,” he said.
Worth noting, John Boyd, CFP and founder and lead wealth advisor at MDRN Wealth, said the two stocks in question — VOO and SPY — only made up about 1% of Buffett’s portfolio.
Personally, he wasn’t that surprised about the sale.
“Warren Buffett is an ultra-high net worth individual,” he said. “It’s common for individuals at that level to own the underlying stocks of the S&P 500 directly through a direct indexing strategy.”
This approach can offer greater cost efficiency and possibly even more favorable tax treatment, he said.
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