Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.
It’s not hard to see why Warren Buffett’s Berkshire Hathaway is one of the most famous public companies in the world. In the third quarter of 2021, Berkshire reported operating income of $6.5 billion, up 18% from a year earlier. Shares of the company have gained almost 30% in 2021.
If you want to own a share of a company whose shares could be more expensive than your mortgage, look no further than Class A shares of Berkshire Hathaway (BRK.A). For those who prefer a more economical option, Berkshire Hathaway Class B shares (BRK.B) are very affordable.
Featured Partner Offer
JP Morgan Self-Directed Investments
New customer bonus
Up to $625 with qualifying deposits
JP Morgan Self-Directed Investments
On the JP Morgan website
INVESTMENT AND INSURANCE PRODUCTS ARE NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
How to Buy Berkshire Hathaway
Evaluating Berkshire Hathaway’s finances
With a market capitalization of over $600 billion, Berkshire is among the ten largest U.S. public companies. If it were a mutual fund, it would be the biggest fund in the world.
Berkshire holds stakes in countless companies, including Coca Cola, American Express and Bank of America, and operates a number of major subsidiaries, such as GEICO, Dairy Queen and Clayton Homes.
But just because it has plenty of big names doesn’t mean you shouldn’t do your due diligence to make sure a potential investment in Berkshire is right for your portfolio.
When you buy a stock like Berkshire Hathaway, you should always start by evaluating its financial records, starting with its annual reports (Form 10-K) and quarterly reports (Form 10-Q). These reports, usually referred to as earnings reports or quarterly results in the financial media, detail the company’s most recent performance.
You can find them on Berkshire Hathaway’s Investor Relations site or in the SEC’s EDGAR database. Be sure to seek out expert analysis, such as you might find on Fidelity, Morningstar, or Forbes, for more information on these financial documents.
Decide on your investment goals
Before you start buying Berkshire Hathaway stock, you need to make sure that investing in the company is in line with your overall investment goals.
For example, is your primary reason for investing to generate capital appreciation in your portfolio? If so, Berkshire may be a good choice. Since 1965, the company has delivered average annual returns of 20%, nearly double the annual returns of the S&P 500. While past performance is no guarantee of future success, that fact alone could make BRK a great choice for investors. long-term purchases. hold investors.
If, on the other hand, you are looking to generate passive income through dividends, you may want to find another investment. Berkshire hasn’t paid a dividend since 1967, opting instead to reinvest earnings to grow its holdings.
Decide if you want BRK.B vs BRK.A
As mentioned above, the Berkshire Hathaway stock comes in two versions: BRK.A and BRK.B. You will need to determine what you want in your wallet.
BRK.A was Berkshire Hathaway’s first common stock offering (originally it was just BRK). In December 2021, BRK.A was trading around a stratospheric $429,000 per share.
Back in the 1990s, when shares were priced at a relatively paltry $30,000 or so, Warren Buffett opted to create a second class of shares rather than do a stock split to create more shares and reduce the Entrance fees to the Berkshire Hathaway property.
In most cases, BRK.A and BRK.B are the same except for the huge price difference. BRK.B comes in at a much more affordable price of $284 per share. This distinction was perhaps the most important before fractional stock investing became more common and potential investors had to shell out for full shares of BRK.A or BRK.B.
It’s also important to note that BRK.A shares come with significantly higher voting rights, which makes sense given their much higher price and the ability to convert them into class B shares at any time. You cannot convert class B shares into class A shares.
Choose a brokerage platform
Once you know what kind of stocks you want, then you need to settle on a place to buy them. If you already have a brokerage account, the easiest way is probably to just use your current provider.
But if you don’t have an account outside of an employer pension plan, check out our list of the best online brokers.
When checking out the options, just make sure the platform offers the type of account you want, whether it’s an Individual Retirement Account (IRA) or a taxable investment account.
You’ll also want to make sure that it offers commission-free trading in US stocks – most major brokerages do this now – and that it has offers that will help you achieve any other financial or investment goals, like split stock investing or tools to help you save and invest. better.
SoFi Automated Investing
SoFi Automated Investing
Calculate how much you want to invest
Even Warren Buffett doesn’t have an unlimited amount of money to spend on Berkshire. To determine how much to invest in BRK.A or BRK.B, ask yourself these four questions:
- What is your budget ? You should never invest the money you need to cover your expenses. After setting aside money for these and an emergency fund, if you don’t already have one, you can invest whatever is left to achieve your wealth building goals.
- What is the current price of BRK.A or BRK.B? With fractional shares, of course, BRK’s price may be less of a determining factor, but if your brokerage doesn’t allow you to buy whole share portions, you’ll probably want to aim for BRK.B shares. .
- What is your investment strategy? People generally invest in one of two main ways: they deposit a large initial amount or invest smaller amounts regularly over months and years. This second process, called averaging, can help you pay an overall lower average price per share and can also reduce the level of risk you are taking on at any given time.
- What about your other investments? Chances are BRK won’t be your first or only investment purchase. You will want to assess how this fits in with your other investments and strategies.
Determine your order type and place your order
Once you’ve opened a brokerage account and decided when to invest, it’s time to create your buy order. If you want to simplify things, you can use a market order to buy your shares at the current price each time you place your order.
If you are a more sophisticated investor or only want to invest if you can buy stocks at a certain price, you might consider using a limit or stop-limit order, which only execute trades when specific price conditions are met. Just be aware that when you do this, it’s possible that the action will move away from the price you set as your limit, which means that you may end up with no action.
Assessing Berkshire Hathaway’s performance
Investing is not a single activity. You’ll want to check the performance of your Berkshire Hathaway investment over time to make sure you’re on track to meet your goals and determine whether you want to buy, sell, or hold steady with BRK.
First, find its annual rate of return. This way you will have a data point that you can compare to other stocks and benchmarks like the S&P 500 and the Nasdaq Composite Index. You can also revisit the fundamental data you looked at earlier to see how these numbers are changing over time.
How to Sell Berkshire Hathaway Stock
If you decide you’re ready to exit your position in Berkshire, selling your shares is as easy as buying them. Again, you will have the option of selling at the market price or using stop or limit orders if you only want to sell at or above a certain price.
Most important when selling, however, is the need to consider taxes. If you bought your shares in a retirement account, you don’t have to worry about that. But if you bought your shares through a normal brokerage account and are making a profit, you may have to pay capital gains tax. (If you sell at a loss, on the other hand, you may be able to claim it for tax purposes.)
If you are likely to make large gains, be sure to speak with an accountant so you are aware of any tax consequences you may incur.
Other ways to invest in Berkshire Hathaway
Berkshire Hathaway is a very large company. On its own, it’s the ninth-largest component of the S&P 500, meaning just about any large-cap index fund or exchange-traded fund (ETF) will have some exposure to BRK.
For long-term passive investors, such as those saving for retirement, these funds can be prime investment opportunities. Not only do they give you the potential to grow hundreds of businesses, but they also minimize the risk of you losing money on a single investment.