Warren Buffett's Berkshire Hathaway (BRK.A 0.27%)(BRK.B 0.31%) recently released its latest 13F filings, unveiling its recent positions, and telling investors which stocks it bought and sold since the last quarter. What surprised some investors was that Berkshire had exited positions it had in both the SPDR S&P 500 ETF Trust and the Vanguard S&P 500 ETF.
Buffett routinely tells investors to bet on America and the market's long-term growth, with funds mirroring the S&P 500 (^GSPC 0.03%) being a good way to do just that. Do Berkshire's latest moves suggest that Buffett may be worried about a market crash?
NYSE: BRK.A
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Buffett has told investors to buy index funds in the past
At the 2020 annual Berkshire meeting, Buffett told investors that simply tracking the S&P 500 is a sound strategy: "In my view, for most people, the best thing to do is own the S&P 500 index fund." By having exposure to hundreds of the top stocks on the market, investors can diversify and benefit from the market's overall health and long-term growth.
Historically, the S&P 500 has grown at a rate of around 10% per year. For two years in a row now, its gains have been in excess of 20%. Betting on the market for the long haul has been an excellent strategy for investors to deploy. But if that's the case, why did Buffett sell his positions in those ETFs?
NYSE: BRK.B
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Why investors shouldn't read too much into Berkshire's latest moves
It may be tempting to think that Buffett is worried about the S&P 500, and that's why he's exited those holdings. But the reality is that they were never large positions for Berkshire to begin with; they didn't even account for close to 1% of the overall portfolio. The largest holdings for Berkshire are individual stocks, with Apple, American Express, and Bank of America normally being staples at the top. Currently, they account for half of the fund's total weight.
Buffett has also said that he doesn't place a lot of value on economic forecasts: "Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future." Although some investors may be worried about potential trade wars and tariffs and their effect on the economy, Buffett has remained invested in the stock market for decades, during even more turbulent economic conditions.
While Buffett says that investing in a diversified index fund is the best option for most people, he doesn't fall into that category. Buffett has become one of the richest people in the world thanks in large part to his ability to find excellent companies to invest in. He doesn't need an index fund and can rely on his own stock-picking abilities.
ETFs are still great options for investors, as are individual stocks
Although Berkshire exited its position in a couple of S&P 500 ETFs, that doesn't tell investors anything about what Buffett's thinking about the current state of the market. His investment goals are going to differ from those of the average individual investor. Ultimately, investors should make decisions that are appropriate for their own strategies and levels of risk tolerance.
The ETFs Berkshire sold still make for solid long-term options for investors. But if you are comfortable with picking individual stocks, that may be a preferable route as well. Whatever option you choose, staying invested in the market for the long term remains a solid strategy, and Berkshire's latest moves shouldn't dissuade you from doing so.
