A Look Back At The Last 20 Years

Berkshire Hathaway's Stock Price Returns May Have Been Negatively Impacted by Easy Money

A Look Back at the Last 20 Years

For investors looking to see the potential impact of easy money on stock price returns, they need to look back no further than 20 years.

Berkshire Hathaway's Performance

Over the last 20 years, Berkshire Hathaway stock has generated a compound annual return of just over 20 percent. This is a respectable return, but it is significantly lower than the S&P 500's return of over 27 percent during the same period.

One possible explanation for this underperformance is that easy money has led to inflated asset prices. This has made it more difficult for Berkshire Hathaway to find undervalued companies to invest in. As a result, the company has been forced to pay higher prices for acquisitions, which has weighed on its returns.

The Takeaway for Investors

The biggest difference is that buying Berkshire Hathaway or any other stock for that matter is generally done as an attempt to beat the market. Easy money can distort markets, making the goal of beating the market much more difficult.

Investors should be aware of the potential impact of easy money on stock price returns. They should also be mindful of the fact that Berkshire Hathaway is a long-term investment. As such, investors should not be discouraged by its recent underperformance.