Investing Verses Gambling - Deepstash
Investing Verses Gambling

Investing Verses Gambling

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Investing Verses Gambling

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Gambling Verses Investing

The Bet That Proved Passive (Index) Investing is Superior to Active Management

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Bonds

Buffett acknowledged a lesson learned from an interesting plot twist over the course of the bet.

·        At the outset of the wager, Buffett and Seides bought about $300,000 worth U.S. Treasury bonds, widely considered a safe investment.

·        The expectation was that the bonds would grow to about $1 million at the end of the decade, and the winner would claim the prize pool for charity.

·        But, the bonds gave back "pathetic" returns, Buffett wrote.

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Bonds  Continued

·        "Bonds had become a dumb -- a really dumb -- investment compared to American equities" or stock, he said.

·        So, in 2012, Buffett and Seides dumped their Treasury bonds and used the money to buy B-class shares of Buffett's Berkshire Hathaway (BRKB).

·        By the end of the bet, the Berkshire shares were worth $2,222,279 -- about $1.2 million more than they'd hope to earn with the bonds.

·        In short, the "purportedly 'risk-free' long-term bonds" ended up being a "far riskier investment" than common stocks.

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