Berkshire Hathaway CEO Warren Buffett. The Berkshire Hathaway (ticker: BRK/A, BRK/B) CEO hasn't liked bonds for a decade due to low rates, and that view hasn't changed based on the small percentage of bonds in the company's huge investment portfolio. Berkshire held $18.6 billion of bonds on Sept.
The 90/10 rule in investing is a comment made by Warren Buffett regarding asset allocation. The rule stipulates investing 90% of one's investment capital towards low-cost stock-based index funds and the remainder 10% to short-term government bonds.
Key Points. Buffett's Berkshire Hathaway portfolio includes two S&P 500 index ETFs -- SPY and VOO. Both ETFs have low costs and have delivered solid returns since inception.
Berkshire has issued yen bonds every year since 2019, when it priced one of the biggest yen offerings ever by an overseas firm.
Top Warren Buffett Stocks By Size
Coca-Cola (KO), 400 million. Kraft Heinz (KHC), 325.6 million. Occidental Petroleum (OXY), 194.4 million. Chevron (CVX), 165.4 million.
Buffett, 92, takes a different tack than virtually all other major insurers by investing heavily in stocks and holding a lot of cash in the form of Treasury bills—rather than investing insurance premiums mostly in bonds. Buffett would rather hold cash and not take the interest-rate risk of bonds.
Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater risk. Bonds are generally more stable than stocks but have provided lower long-term returns. By owning a mix of different investments, you're diversifying your portfolio.
Bonds are a vital component of a well-balanced portfolio. Bonds produce higher returns than bank accounts, but risks remain relatively low for a diversified bond portfolio. Bonds in general, and government bonds in particular, provide diversification to stock portfolios and reduce losses.
Warren Edward Buffett, the legendary value investor, turned an ailing textile mill into a financial engine that powered what would become the world's most successful holding company.
Normally, you're limited to purchasing $10,000 per person on electronic Series I bonds per year. However, the government allows those with a federal tax refund to invest up to $5,000 of that refund into paper I bonds. So most investors think their annual investment tops out at $15,000.
2022 was the worst year on record for bonds, according to Edward McQuarrie, an investment historian and professor emeritus at Santa Clara University. That's largely due to the Federal Reserve raising interest rates aggressively, which clobbered bond prices, especially those for long-term bonds.
10-year Treasury Note
U.S. Treasury bonds are considered the safest in the world and are generally called “risk-free.” The 10-year rate is considered a benchmark and is used to determine other interest rates such as mortgage rates, auto loans, student loans, and credit cards.
Risks to Investing In Bonds
While bonds are considered safer investments, they're not risk-free. The biggest risk to bond investors is that the issuer won't make timely payments, known as credit risk. The lower a bond's credit rating, the higher its credit risk. A bond's default risk can change over its lifetime.
The value of fixed income securities will fluctuate and, upon a sale, may be worth more or less than their original cost or maturity value. Bonds are subject to interest rate risk, call risk, reinvestment risk, liquidity risk, and credit risk of the issuer.
And as the Fed has followed through and raised interest rates multiple times, bond funds have piled up losses. Bond yields and prices move in opposite directions. Higher interest rates makes the yields on current bonds less attractive.
In general, stocks are riskier than bonds, simply due to the fact that they offer no guaranteed returns to the investor, unlike bonds, which offer fairly reliable returns through coupon payments.
The portfolio's five largest positions are Apple Inc. (AAPL), Bank of America Corp (BAC), American Express Company (AXP), Chevron, and The Coca-Cola Company (KO). Apple is Berkshire's largest holding, accounting for nearly 41% of its stocks portfolio. The top 5 holdings account for nearly 70% of the portfolio.
While Berkshire Hathaway itself does not pay a dividend because it prefers to reinvest all of its earnings for growth, Warren Buffett has certainly not been shy about owning shares of dividend-paying stocks. Over half of Berkshire's holdings pay a dividend, and several of them have yields near 4% or higher.
Warren Buffett Is Raking in $2.8 Billion in Annual Dividend Income From Just 3 Stocks | The Motley Fool.
Ally Financial Inc. (NYSE:ALLY) is one of the newest investments in the Berkshire portfolio. The hedge fund added Ally Financial Inc. (NYSE:ALLY) to its portfolio in the first quarter of 2022, and as of Q3 2022, Berkshire had 30 million shares of the company worth $835 million, representing 0.28% of the total holdings.