When an investor like Warren Buffett makes a move, financial headlines light up worldwide, and for good reason. The “Oracle of Omaha” has built Berkshire Hathaway into a trillion-dollar business while personally amassing a fortune exceeding $160 billion. So when news broke that Buffett had sold off Berkshire’s entire stake in ETFs tracking the S&P 500—specifically the Vanguard S&P 500 ETF (VOO) and SPDR S&P 500 Trust ETF (SPY)—many investors naturally wondered if they should follow suit.
This sell-off coincided with the S&P 500 entering correction territory (a drop of 10-20% from recent highs), causing some to interpret Buffett’s actions as a prescient warning of further market troubles. But before Kiwi investors rush to reassess their portfolios, it’s worth examining what might be behind Buffett’s decision and whether his moves should influence yours.
We need to make a critical distinction right away: Warren Buffett’s investment goals and strategies are fundamentally different from those of most everyday investors. Berkshire Hathaway operates with specific objectives, timelines, and risk parameters that likely don’t match yours.
Throughout 2024, Berkshire sold approximately $134 billion in equities, bringing its cash reserves to over $334 billion by year-end—nearly double what it held at the close of 2023. This substantial cash position might suggest Buffett is preparing for significant acquisitions or individual stock purchases rather than abandoning market exposure altogether.
Remember that Berkshire has historically favoured concentrated positions in individual companies over index funds. At one point, Apple alone constituted over 40% of Berkshire’s stock portfolio (though that’s since decreased to around 23%). This approach has always been at odds with Buffett’s advice to ordinary investors.
Ironically, while Buffett has sold Berkshire’s S&P 500 ETF holdings, he has consistently recommended that everyday investors do exactly the opposite. He has repeatedly advised regular investors to consistently invest in low-cost index funds tracking the S&P 500 as their primary investment strategy.
Why the apparent contradiction? Because Buffett recognises that most investors lack the time, resources, expertise, or temperament to successfully pick individual stocks or time the market. For these investors, which includes most of us, consistent contributions to broad market indices remain the most reliable path to long-term wealth accumulation.
For Kiwi investors, it’s worth noting that while we don’t have direct equivalents to the VOO or SPY funds in New Zealand, many KiwiSaver schemes and local index funds offer similar exposure to US and global markets. Funds like the Smartshares US 500 ETF (USF) provide NZ investors with access to the S&P 500 companies.
Additionally, New Zealand investors face different tax considerations through the Foreign Investment Fund (FIF) rules when investing in overseas markets, which don’t affect Buffett’s decision-making but might influence yours.
One of the biggest mistakes investors make is attempting to time the market—selling when they think it will fall and buying when they believe it will rise. This approach seems logical in theory but proves remarkably difficult in practice, even for professional investors.
Market timing requires being right twice—once when selling and again when buying back in. Missing just a few of the market’s best days can dramatically reduce long-term returns. For instance, historical analysis shows that missing the 10 best trading days over 20 years can cut your overall returns nearly in half.
Rather than trying to mimic Buffett’s specific investment moves, Kiwi investors might be better served by adopting dollar-cost averaging—a strategy where you invest a fixed amount at regular intervals regardless of market conditions.
This approach helps mitigate the impact of market volatility by automatically purchasing more shares when prices are low and fewer when prices are high. Over time, this tends to lower your average purchase price and reduce the emotional stress of investing during market turbulence.
Perhaps the most valuable lesson we can take from Buffett isn’t about his recent selling activity but his long-term philosophy. Despite Berkshire’s recent ETF sales, Buffett’s core investment principles remain unchanged: maintain a long-term perspective, avoid unnecessary trading, and understand that market corrections and bear markets are natural parts of the investing cycle.
The S&P 500 has weathered numerous significant economic crises—from the 1987 Black Monday crash to the dot-com bubble, the 2008 Global Financial Crisis, and the COVID-19 pandemic—yet has delivered strong long-term returns to patient investors. New Zealand’s own NZX has shown similar resilience over extended periods.
For most New Zealand investors, the wisest course of action is to stick with your long-term investment strategy rather than reacting to news of Buffett’s portfolio adjustments.
If you’re investing for retirement through KiwiSaver or building wealth through regular contributions to index funds, continuing this disciplined approach is likely more beneficial than attempting to emulate the tactical moves of billionaire investors.
Remember that Warren Buffett himself has directed that after his death, his trustee should invest 90% of his wife’s inheritance in an S&P 500 index fund—a powerful endorsement of index investing for individuals, regardless of Berkshire’s current portfolio positioning.
Time in the market, not timing the market, remains the most reliable path to long-term investment success. And that’s advice that even Warren Buffett would endorse.
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