@Dynamic, I have also held Berkshire from 2002 but my recordkeeping till 2015 was haphazard at best so hard to calculate the overall IRR but suffice it to say the investment has worked well and allowed me to sleep at night.
Haha, I have a similar situation for some of the same sort of period. I've managed to piece together most of my client ledger, but I'm missing a few exact dates and prices from early trades in the the time before I switched my broker to allow non UK trading. Luckily my exact Berkshire purchases are ones I kept track of, and Yahoo Finance helped out with historical exchange rates to convert them to USD.
Mine was in an ISA so no need to keep records for tax purposes and BRK.B gave me the added advantage of no dividends to reinvest and pay withholding tax on, giving me a further advantage over an S&P500 index fund. There turned out to be other advantages over the equivalent index fund investments based on what I could fund with the proceeds in 2014-2015 when the index was lagging considerably, perhaps more by luck than judgement.
You make a crucial and often underappreciated point about the relatively small range of price that Berkshire usually experiences. In the list of stocks I follow it has the lowest range between highs and lows in the last 1 year ( a particularly volatile one in the markets) apart from Unilever ( 18% and 15%)
What this means in practical terms is that if you are a buyer or a seller, the difference between picking the absolute best time to buy or sell in any year is much less than the average stock so over the long term, you are unlikely to be penalised much for unfortunate timing, when evaluated over a 5 year period.
I agree with that and what @Paarslaars said, and would add that in addition to this, I'm happy knowing what I'm buying in Berkshire, the integrity and honesty of my business partners and the diversity of its earnings streams, with its relatively consistent IV compounding rate in all economic climates being close to that of the S&P500 long term and with the price being below a conservative estimation of IV by a relatively consistent margin over time.
With an index fund I'm less certain of that, but make up for some of the uncertainty with a little extra decorrelation among the constituents, but I feel Berkshire is the better bet for me almost all of the time (or if I feel it's a little pricey I may just wait in cash until it's in the lower part of its range). It's also why I'm entirely happy holding a 100% weighting in Berkshire for the long term.
So while BRK.B is a bedrock of meeting my long-term compounding goals, since I became more active as an investor I have also found BRK.B to be useful currency in funding rare high-conviction opportunities (e.g. 25%+ cagr) where I might want to put in, say 25% of my portfolio.
BRK.B is usually trading at a similar or lesser discount to IV than when I bought it, so I'm usually gaining around 10% a year (way better than holding cash) while I'm waiting, I'm usually paying a price towards the lower end of Berkshire's trading range, and I'm very unlikely to lose very much purchasing power in the short term even if I happen to come across that other big opportunity within months of purchasing more Berkshire.
I'd imagine I'd be very unlikely to lose more than 10-15% this way by the time it came to sell some BRK.B, and I'd be much more likely to gain while waiting, and that the margin of safety in the High Conviction Opportunity would far outweigh my low-likelihood 15% loss in any case.
So I've emotionally prepared myself to eat the loss and not paralyse myself through loss-aversion into missing out on the HCO. It's a matter of my own temperament that I've prepared my mind and twisted my thinking to overcome my loss-aversion instinct enough to relish the taking of a certain 15% loss in BRK.B over a few months as part and parcel of the process of locking in a high conviction opportunity for a much larger potential gain in the future.
I guess I give my self a little dopamine reward when I recognise I've overcome such a cognitive bias just as I do when cutting my losses (or sub-par gains) in selling positions where my original thesis has changed. I think the most loss I've actually taken on my most recent Berkshire purchase to buy into a high return opportunity is just short of a 5% loss in about a month, and far more often I've gained purchasing power (e.g. 15% in 3 months) while waiting.
I think having Berkshire as the bedrock of my portfolio doing all the compounding that I need and expect also helps me to remain focused on waiting for opportunities that truly meet my high conviction threshold instead of just buying things that look reasonably priced but don't really scream out as bargains.
Finally one of the characteristics of Berkshire is that it has to be held as a 5 year+ position to evaluate performance. It's the wrong business for quarterly excitement. It can go through long-ish periods of price stagnation and in retrospect they tend to be good opportunities to lock-in safe and significant returns.
Yes, I'd agree that the index can go on a tear from time to time, while Berkshire stagnates, and I'd expect Berkshire's IV to compound close to or slightly lag the index when the index is rising, but to materially beat the index most times when the index is falling. There can often be a time lag between the index recovering from a down period and Berkshire's price recovering fully, so you can certainly find yourself regaining ground very much slower than the index in times like the last few months!
