🧠 Warren Buffett vs. Cathie Wood

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Friends,

Step with us into a time machine. Rewind the clock to 2014. You’ve got $10,000 to invest and two options for where to put it.

In one corner is Cathie Wood’s ARK Innovation ETF (ARKK). Wood focuses on young, innovative, and “risky” stocks. Her valuation decisions are based mainly on a company’s opportunity.

In the other corner is Warren Buffett’s Berkshire Hathaway (BRK-B). Buffett prefers highly predictable, mature businesses that return cash to shareholders. His valuation decisions are based mainly on a company’s actual performance.

How have those different options panned out?

• 5 Years Later (October 2019):
  • The ARK investment reaches $20,300, thanks to investments in 3-D printing, Tesla, and other tech companies.
  • Berkshire Hathaway grows to $15,200. A notable move — Berkshire now owns a big chunk of Apple.
• 7 Years Later (October 2021):
  • Buoyed by the pandemic, the investment in ARK is now worth an astounding $63,700 — making Wood one of the most famous investors in the world.
  • It seems like Buffett might be getting too old for the investment game: the Berkshire investment is worth far less: $20,600.
• 9 Years Later (Today):
  • The onset of inflation and Fed rate hikes hit ARK’s investments hard. Your original investment is now worth $23,400 — over 60% less than two years ago.
  • Buffett’s investments, however, are far less affected. They eclipse Wood’s returns, standing at $24,500.

The moral of the story isn’t that one approach is better than the other. The returns are essentially identical, and both have helped investors more than double their money.

The moral is that investment styles can be diametrically opposed and still accomplish their goals.

That’s why it’s so important to define your investing style. Taking the time to write down an investor policy statement can help you figure out which investments are the best match for you.

You can do that by answering questions like:

• Is your primary goal to grow your principal? Beat inflation? Generate income? Protect your downside?
• Is your time horizon less than a year? Three years? Decades?
• How much volatility are you willing to endure (in both directions)?
• Is valuation an essential part of your process or an afterthought?

Answering these questions isn’t easy. They might also change over time as you gain investing experience (and life throws a few curveballs your way.)

But figuring out your investing style is essential if you want to achieve your financial goals.

Want some help? We’re hosting a free webinar on July 19th at 12:00 EST that explores this concept in more detail.

We’ll dive deep into the critical differences between super investors like Wood, Buffett, and others — and how to find the right metrics to watch depending on your investing style.

Interested? You can register for the event by clicking here.

Wishing you investing success,

– Brian Feroldi, Brian Stoffel, & Brian Withers

One Simple Graphic:

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One Piece of Timeless Content:

You might think that your chances of picking a winning stock randomly would fall on a bell curve. But this isn’t the case at all. This Blackstar Funds report analyzed 23 years of stock returns and drew some unexpected conclusions.

One Twitter Thread:

Li Lu is the most successful investor you’ve never heard of. MnkeDaniel walks through nine tenets of his investment philosophy, which is a great read for experienced and novice investors alike.

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One Resource:

Even if you have a passing interest in history, you’ll love the award-winning site: histography.io. Built on Wikipedia’s exhaustive content, it maps the world’s historical events into a dynamic visual interface.

One Quote:

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