Soaraway Funds That Beat Even the Mighty Warren Buffet… and the Lessons EVERY Investor Could Learn from the Legendary ‘Sage of Omaha’

Warren Buffett is the Goliath of the investment world. Since he started in 1965, he has delivered returns of 4,384,749 percent to savers in his investment vehicle Berkshire Hathaway.

That means someone who initially put in €100 would now be sitting on a €4.3 million (€3.4 million) knockout.

It’s no wonder that the 93-year-old is celebrated worldwide and that his annual shareholder meeting – held this Saturday in Buffett’s hometown of Omaha, Nebraska – looks more like a festival than a typical, subdued AGM.

Surely no one beats this, right? Well, not exactly.

Wealth worked with investment platform AJ Bell to identify the funds and investment trusts that have beaten Berkshire Hathaway’s returns over the past two decades.

There have been so few funds since 1965 that it’s hard to find funds that have beaten him in that period. However, according to AJ Bell, 41 of the 973 funds and investment trusts available to UK investors have beaten Buffett in 20 years (see table above).

Berkshire Hathaway achieved an impressive dollar return of 555 percent over twenty years. This represents an 855 percent return for British investors as the value of the pound has weakened over the period.

If a British investor put £1,000 into Berkshire Hathaway 20 years ago, it would be worth £9,549 today. The strategy is impressively simple. Berkshire Hathaway has built a portfolio of more than 40 blue chip companies – such as Apple, Bank of America, American Express and Chevron. Buffett is concerned with finding good companies at a good price, rather than worrying too much about the prospects for economies and financial markets. Then he will stick with it for the long term.

However, if you had put £1,000 into FSSA Indian Subcontinent, which is the best performing fund, you would have gained a lot more – an impressive £25,081.

Ben Yearsley, director of Fairview Investing, says there are very good reasons for the fund’s “amazing” performance. “India is the world’s largest democracy and one of the most dynamic economies, which has been boosted by Prime Minister Modi,” he said.

However, he warns that as India is one of the best performing markets, the country is now also one of the most expensive. This reduces the chance that such a fund can deliver such spectacular performances over the next twenty years.

Jason Hollands, managing director of investment platform Bestinvest by Evelyn Partners, points out that of the top ten outperformers, five are technology funds: AXA Framlington Global Technology, Polar Capital Technology, Fidelity Global Technology, Janus Henderson Global Tech Leaders and Allianz Technology Trust. .

He says it is no surprise that such funds have delivered high returns as technology companies have seen phenomenal growth.

“Tech stocks and tech-backed companies like Amazon and Facebook owner Meta have been the standout part of global stock markets over the past two decades,” he says. “Twenty years ago, technology was left battered and bruised by the bursting of the dot-com bubble, but it has since grown to account for 30 percent of the U.S. stock market. It has now benefited from the artificial intelligence mania.”

He adds that the trusts and funds that have beaten Berkshire Hathaway are specialist funds and have a much narrower portfolio.

These better-performing funds and trusts may be winners now, but there’s no guarantee they’ll deliver similarly stellar returns in the next twenty years.

Their fund managers can of course claim some credit, but much of their success has been due to the fact that they have taken advantage of the rising markets in the area in which they have invested.

In contrast, Berkshire Hathaway has achieved great returns not by growing any one sector, but by investing broadly across multiple sectors. It has achieved outperformance under all market conditions.

What can investors learn from this? The trick is probably to gather the insights of the so-called Sage of Omaha, rather than trying to defeat him. He has shed many pearls of wisdom over the years.

The first of these is that these must be long-term. One of Buffett’s most famous quotes is: “Our favorite holding period is forever.” Berkshire Hathaway’s portfolio confirms this. The company has owned Coca-Cola shares for more than 34 years, American Express for 29 years and credit rating agency Moody’s for 22 years.

But holding for the long term doesn’t mean holding it indefinitely, or cutting your losses if an investment doesn’t work out. Interfering with your portfolio often increases the risk of buying and selling at the wrong time, incurring trading fees.

Another of Buffett’s strategies is the use of tracker or index funds. In 2016, he wrote in his Berkshire Hathaway report that “investors large and small should stick to low-cost index funds.” These are funds in which the positions are not hand-picked and managed by an active fund manager, but simply follow an index such as the FTSE 100 or the S&P 500.

Because these funds follow the market, they do not outperform. But they are often cheaper because investors do not pay for a manager.

Laith Khalaf, head of investment analysis at AJ Bell, says this doesn’t seem logical “for a man who has made a fortune through active money management.” However, look at the numbers and you will see the logic. According to AJ Bell, less than a third of actively managed equity funds in Britain have outperformed passive alternatives over the past decade.

Investors don’t have to choose between active and passive funds, but can build a core of low-cost passive funds and then use actively managed options if they think they can add value.

A third rule of Buffett is that you should never invest in something you don’t understand. He says: ‘Risk comes when you don’t know what you are doing.’

It is for this reason that he avoids things like cryptocurrency and instead invests in household brands with easy-to-understand business models.

Khalaf says this advice can prevent you from losing money and experiencing buyer’s remorse.

However, savers often put off investing because they feel like they don’t know enough – but sometimes the best way to learn is to start.