Investing in 2022 has felt a lot like taking a pie in the face, lately. 🥧 The big S&P 500 index has fallen 14% and things have deteriorated so much that even Cardi B is asking if we’ve hit a recession yet. Oof! The answer is, not quite. But investing maverick Warren Buffett isn’t waiting around to find out. Buffett has poured US$51 billion into new investments this year through his company Berkshire Hathaway (BRK.A, BRK.B), including into Top Gun producer, Paramount (PARAA). 🛫
The market’s been rich pickings for active stock pickers like Buffett. According to Bloomberg, nearly 70% of actively managed US stock mutual funds that try to outperform the S&P 500 have done so in the first half of this year. That’s a big change from last year, when only 15% were able to beat ‘passive’ investors tracking the S&P 500 Vanguard ETF (VOO), which cruised home with an impressive 27.7% return.
Not all actively managed funds are having fun though. Big New York hedge fund Tiger Global has had their returns mauled by 50% this year. Yep, even they might have to dig deeper into their resilience and strength to defeat evil in the Year of the Tiger. 🐅 While other actively managed funds have also turned from YOLO to ‘OH-NO!’. Like the Advisor Shares Pure Cannabis ETF (YOLO), which has seen their shares smoked, down 48%.
So is passive investing dead? 💀 Unlikely. But investors might need to think longer term. Top Gun Buffett thinks putting money into low-cost ‘passive’ index funds is a good option for most long term investors. In 2017, Buffett famously won a US$1 million bet that passive funds would beat the returns of a group of actively managed hedge funds over a ten year period. A bet that the former hedge fund investor who lost wouldn’t do again. According to Bloomberg, just 17% of US large-cap stock pickers beat the S&P 500 over the 10 years through 2021. That might be just what Cardi B needs. Yolo.