My 401k investments in 2013 were exceptionally successful, unless you compare them to other aggressive investors, who were rewarded by 32% from the S&P 500. Really aggressive investors did even better, with a return of 38% from small- and mid-cap funds. So the 40% that I invested in the S&P and the 24% invested in small- and mid-cap funds did really well. Unfortunately, I had 24% in international funds that returned only 14% (“only” is a relative term), and even worse I had 12% in bonds that lost 3% for the year. So much for diversification!
My non-401k investments did even worse because much of it was invested in Berkshire Hathaway and some was in Ford and Lifetime Fitness, none of which did as well as the S&P. Regarding Berkshire, Warren Buffett this week issued his annual letter to the shareholders. In the letter, he noted that the company stock gained a mere 13% in 2013, while its intrinsic value increased by 18%. Although both of these gains were dwarfed by the S&P, Buffett explained that he and Charlie Munger expected the company to do better than the S&P in all bearish and modest years and to be beat often by the S&P in bullish years like 2013.
Buffett remains confident in America’s economy vis-à-vis the rest of the world, and he remains confident of Berkshire’s performance vis-à-vis the rest of the market. As I read Buffett’s letter, he fortified my support of his leadership (including his transition planning), so I will continue to leave 10% of my total net worth with Berkshire.
Incidentally, Buffett’s letter noted that Berkshire’s net worth increased by $34.2 billion in 2013, but a related article in USA Today focused on the company’s record annual profit of $19.5 billion, which exceeded 2012’s of $14.8 billion. Because the profit was expected to be $18 billion, I am hopeful that the market will correct upwardly this Monday.