The market’s past year has simply been incredible. Since hitting bottom in late March after the pandemic hit the economy hard, the S&P 500 has increased by 75%. And the Nasdaq has done even greater things, with that index doubling since its lows.
This has left many investors anxious over the potential for an overheated market causing a possible crash. But I’m not worried.
While a decline is possible, long-term thinkers should treat them as opportunities to invest in great businesses at bargain prices. With stocks like Berkshire Hathaway being the backbone of my portfolio, I have no anxiety about the direction of my wealth.
Berkshire Hathaway is the company that gave Warren Buffett his wealth. It owns over 60 subsidiary companies in a wide range of industries. Some of the more well-known are GEICO, Duracell, Fruit of the Loom and Dairy Queen.
Also, Berkshire has a large stock portfolio of about $277 billion. With $117 billion of this being in Apple shares.
Berkshire keeps a ton of cash to snatch up more subsidiaries and buy more shares. At the end of the third quarter, the company had over $145 billion in its bank accounts.
The important point here is that Berkshire’s businesses and investments were selected for their resilience. Consider Duracell, GEICO, BNSF Railway, and Berkshire Hathaway Energy. They provide things people need, even if the markets are in terrible shape.
On top of this, Berkshire’s 56-year track record proves it can withstand almost anything. Since 1965, the S&P 500 gave negative returns 12 times. Berkshire beat the S&P in all of those years but two, and usually by a pretty large margin.