Buffett Roasts a 4/10 Growth Portfolio Overstuffed With Gold and ETFs

Welcome to Omaha. I see you’ve brought me a brand new portfolio. Now, the paperwork tells me this account is barely out of the womb, so we aren't going to sit here and grade your returns. Those early double-digit unrealized gains might look pretty on your screen, but over a few weeks or months, the stock market is just a voting machine. We need a weighing machine.

So today, we are just going to look at the plumbing you've built for this ten-year voyage you call "Capital Growth." Looking at this sprawling list of holdings, it seems your broker must love you. You have thirty different positions in here. Charlie Munger and I always said that if you have a harem of forty women, you never get to know any of them very well. The same goes for investments. You’ve gone out and bought a little slice of everything on earth, which tells me you aren't quite sure what you actually want to own. Let's pull up a chair and sort through this pile.

Let's look at how you've sliced this pie. You've got about 57% of your money in broad market funds, a hefty 25% in bonds, and a little over 11% in commodities. Geographically, you are anchored heavily in Europe at nearly 43%, which makes sense if you are earning and spending in Swiss Francs, but then you scatter the rest across the globe like seeds in the wind.

You tell me your main goal is capital growth over the next decade. But when I look at your actual holdings, this behaves like a conservative income portfolio. With over a third of your money tagged for income and safety, and bond yields finally offering a real return against a backdrop of sticky inflation, you are well-insulated. But insulation doesn't grow a house.

I also notice you are running with exactly zero percent in cash reserves. I’ve always said cash is a terrible long-term investment, but it is the oxygen that lets you breathe when the market panics. At Berkshire, we always keep plenty of dry powder. Mr. Market is a manic-depressive fellow. Someday soon, he will wake up in a terrible mood and offer you wonderful businesses at bargain prices. Right now, you don't have a single penny set aside to take advantage of him.

The pet rock collection.

Your single largest holding, at over 11%, is a hedged Swiss gold ETF. I have made my views on gold very clear over the decades. It produces nothing. It doesn't pay a dividend, it doesn't build factories, and it doesn't invent new technologies. You buy it only in the hope that someone else will pay you more for it a year from now. Earmarking a tenth of a "growth" portfolio for a cube of metal that just sits there staring at you is a mistake.

Collecting countries like postage stamps.

You own the Vanguard Total World Stock ETF, which is a perfectly fine way to own a piece of global business. But then you went out and bought separate ETFs for Australia, Brazil, Vietnam, Malaysia, and India. Diversification is protection against ignorance, but this is taking it to an extreme. You are just paying extra fees to rebuild the global index you already own.

Confused objectives.

You want ten years of capital growth, yet a quarter of your money is parked in bonds and another chunk in dividend strategies. If you want your capital to grow over a decade, you need to own productive equities with durable competitive advantages, not just fixed income and precious metals. Your portfolio’s engine does not match its steering wheel.

Zero flexibility.

Spending every last cent you have on assets leaves you completely at the mercy of market timing. When an opportunity arises, you'll be forced to sell something else to buy it, likely triggering taxes or forcing you to sell at a loss.

4/10

This portfolio isn't going to blow up and bankrupt you, but it is a tangled, over-engineered mess that contradicts your stated goals. It requires a good spring cleaning. Here is what I would do:

1. Clean out the junk drawer. If you are going to hold a total world index fund, let it do its job. Sell off the tiny 1% and 2% positions in random emerging market country ETFs. It will save you headaches and fees.

2. Realign with your goal. If you truly want capital growth over the next ten years, you need to decide if keeping 25% in bonds and 11% in gold actually serves that purpose.

3. Build a cash buffer. Let some dividends pile up or trim some of the excess positions so you have 5% to 10% in cash. You want a bucket ready when it rains gold, not a thimble.

4. Stop trying to buy the whole world. Find a simple, low-cost way to own productive businesses and let them do the heavy lifting for the next decade.

As I like to say, lethargy bordering on sloth remains the cornerstone of our investment style. Clean this up into a few sensible positions, and then go outside and ignore the market for a few years.