Broker Check

What Did Warren Buffett Tell His Shareholders 30 Years Ago?

| March 29, 2019
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“We do not have, never have had, and never will have an opinion about where the stock market, interest rates or business activity will be a year from now.”

—Warren E. Buffett, the world’s most admired, least imitated investor, in his annual letter to shareholders 30 years ago, dated February 28, 1989

Notes:

  • On February 28, 1989, the Standard & Poor’s 500-Stock Index closed at 288.26.
  • On December 31, 2018 it closed at 2,507.
    • Close to nine times where it was on the day of Buffett’s letter.
  • The average cash dividend of the S&P 500 index for the full year 1989 was $11.73.
  • For the full year 2018, it was $53.61.
    • More than four and a half times where it was in 1989.
  • To get a sense of how these increases compare to inflation, the Consumer Price Index stood at 122 in February 1989.
  • In December 2018 it was 253.
    • Inflation only doubled during the same period.

In summary:

  • During the past 30 years, the S&P 500 increased 900%, dividends increased 450% and the cost of living only went up 200%.
  • If you bought a 30-year Treasury bond in 1989, you would have gotten 8.45% annualized for 30 years and ultimately received your principal back (to re-invest at much lower rates). 

Let’s compare stocks to bonds:

  • $1,000 invested in an S&P 500 index fund would be worth over $9,000, not counting all the dividends over the years.
  • $1,000 invested in a 30-year Treasury bond, even at a high interest rate of 8.45% would have yielded $2,535 total in interest.

When will we ever learn?

It was never about “timing the market.” It is always about TIME IN THE MARKET.

We may not be Warren Buffett, but his wisdom was timeless then, and it’s timeless now.

If you retire at 65 and live to 95, you have 30 years. 

Do you need income that is growing or one that is “safe?” 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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