Berkshire Hathaway Inc. is a multinational American company based in Omaha, Nebraska. It started in 1839 as a textile manufacturer but changed into a conglomerate in 1965 under the leadership of Warren Buffett and Charlie Munger. The company primarily deals with insurance, using the money from premiums to invest in various subsidiaries and securities.
Berkshire Hathaway owns stakes in numerous well-known companies, such as Coca Cola, American Express, and Bank of America, and operates major subsidiaries like GEICO, Dairy Queen, and Clayton Homes.
Buffett and Munger are known for their value investing approach, and under their guidance, the company’s book value has grown at an average rate of 20%, which is higher than the S&P 500 index’s 10% (including dividends) over the same period.
If you’re considering investing in Berkshire Hathaway, there are two primary approaches: you can either purchase the stock directly or invest in ETFs. This guide will provide you with all the information you need to get started.
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How To Buy Berkshire Hathaway Stock
Step 1: Open a Brokerage Account
To buy Berkshire Hathaway stock, you’ll need to open a brokerage account. If you don’t have one, you can check out our curated list of the best online brokers to help you start your search.
When choosing a brokerage, consider the type of account you need, such as an individual retirement account (IRA) or taxable investment account. Make sure that the platform offers commission-free trading of U.S. stocks, as most major brokerages do nowadays.
- For long-term retirement savings, consider a Roth for tax advantages. If you’ve held your Roth IRA for at least five years, you can withdraw money without paying taxes or penalties. Unlike a Traditional IRA, a Roth IRA doesn’t have mandatory minimum withdrawals.
- If you’re saving for general goals like building wealth or a home down payment, a taxable investment account might be a more viable option. Unlike an IRA or a 401(k), you can withdraw your money at any time, for any reason, with no tax or penalty from a brokerage account.
Step 2: Research Berkshire Hathaway’s Fundamentals
Before investing in any company, including Berkshire Hathaway, it’s important to perform due diligence. Here’s what you should do:
Access the company’s financial filings. These filings, including annual reports (Form 10-K) and quarterly reports (Form 10-Q), provide insights into the company’s performance and financial health. You can find these reports on Berkshire Hathaway’s investor relations site or the SEC’s EDGAR database.
Check out expert analyses from trusted sources such as Fidelity, Morningstar, or Forbes. Brokerage firms, including those offering major stocks like Berkshire Hathaway, also provide valuable research and commentary. This will give you insights into Berkshire Hathaway’s financial health, growth prospects, and potential risks.
Step 3: Consider Your Investment Goals
Now that you’ve learned about Berkshire Hathaway’s financials, it’s time to think about whether it aligns with your investment goals.
- For those who want to generate long-term portfolio appreciation, Berkshire Hathaway may be a good fit. Over the years, the company has delivered impressive average annual returns of around 20%, nearly double that of the S&P 500. While past performance doesn’t reflect future results, this historical performance makes BRK.B an attractive option for long-term buy-and-hold investors.
- For those who seek regular income through dividends, Berkshire Hathaway may not be the right choice. The company has not paid dividends since 1967, as it prefers to reinvest its earnings for further growth.
Step 4: Choose Between BRK.A and BRK.B
Berkshire Hathaway offers two classes of stock:
- BRK.A: As the original stock offering, it has a significantly higher price, trading around $554,300 per share as of Jan 2024.
- BRK.B: BRK.B is more affordable, priced at approximately $365 per share as of Jan 2024.
While BRK.A shares come with more voting rights, BRK.B shares are a popular choice for individual investors due to their lower price. It’s worth noting that you cannot convert BRK.B shares into BRK.A, but BRK.A shares can be converted to BRK.B at any time.
Step 5: Decide How Much to Invest
Before you start investing in Berkshire Hathaway, establish your investment budget. The amount of money you invest is typically determined by the following factors:
- Budget: Make sure your investment doesn’t interfere with your monthly expenses, emergency funds, and retirement savings.
- Stock Price: Consider the current price of Berkshire Hathaway shares. If your brokerage allows fractional shares, the price may be less of a determining factor. However, if your brokerage requires whole shares, BRK.B shares may be a more practical choice.
- Investment Strategy: Decide between lump-sum purchase or regular investments using dollar-cost averaging. Dollar-cost averaging involves regularly investing smaller amounts over time, which can lower your average price per share and potentially reduce risk.
- Portfolio Integration: Berkshire Hathaway should be a part of a diversified portfolio rather than the entirety of it. You might include it as a “core holding” within your portfolio, alongside other well-established, large-capitalization companies.
Step 6: Place Your Order
With your research complete, it’s time to buy BRK.B shares. Here’s how:
- Access your brokerage account online or through the broker’s mobile app.
- Berkshire Hathaway’s ticker symbol is BRK.B. Enter this symbol to locate the stock.
- Decide the number of Berkshire Hathaway shares you want to purchase or the dollar amount you intend to invest.
- When you purchase Berkshire Hathaway stock, you can choose to place the order as a limit order or a market order. A market order is processed immediately at the current price, while a limit order is only processed when the stock reaches a price you set. If you have a specific price in mind or want to use more advanced strategies, consider using limit or stop-limit orders. These orders allow you to set specific price conditions for buying shares. However, keep in mind that the stock price may fluctuate and move away from your set limit, which could result in no shares being purchased.
Step 7: Monitor Your Investment
To effectively manage your investments, set up a routine to review your portfolio’s performance:
- Schedule regular check-ins, whether monthly, quarterly, or annually, to ensure the company continues moving in a positive direction.
- Compare Berkshire Hathaway’s performance to broader market benchmarks like the S&P 500 and Nasdaq Composite Index to gauge how it fares in the broader market context.
- Regularly review the fundamental data and financial filings of Berkshire Hathaway to stay informed about the company’s progress.
Keeping an eye on your investment allows you to make any necessary changes based on market shifts or your personal financial goals. For instance, if the value of your Berkshire Hathaway stock goes up or down dramatically, it might be a good idea to reassess your investment strategy.
To make things even easier, consider using an investment portfolio app. These handy tools let you manage all of your accounts in one place, track your portfolio’s performance, and analyze factors like risk and diversification.
How to Sell Berkshire Hathaway Stock
To sell your Berkshire Hathaway (BRK.B) stock, follow these simple steps:
Evaluate Your Decision: Determine if you’re ready to sell your Berkshire Hathaway shares. Consider factors such as changes in your investment goals, need for liquidity, or a desire to lock in profits.
Choose a Selling Method: Decide whether you want to sell at the market price or set specific price criteria using limit or stop-limit orders.
Contact Your Brokerage: Reach out to your brokerage account provider to initiate the selling process. Provide them with the details of your Berkshire Hathaway shares and specify your selling method.
Place Your Sell Order: Work with your brokerage to create a sell order for your Berkshire Hathaway shares. You can either opt for a market order, which sells your shares at the current market price, or set a limit or stop-limit order to sell at or above a specific price.
Monitor the Sale: Keep an eye on the progress of your sell order. Once executed, the proceeds from the sale will typically be credited to your brokerage account.
Be aware of potential tax implications. If you sell shares in a retirement account, taxes may not be a concern unless you withdraw the proceeds. However, if you sell shares in a brokerage account at a profit, you may owe capital gains taxes. Consult with an accountant or tax professional for guidance based on your specific situation.
Other Investment Options
If investing directly in Berkshire Hathaway stock doesn’t align with your investment strategy or preferences, there are alternative options worth considering:
ETFs: Invest in exchange-traded funds (ETFs) that include Berkshire Hathaway as part of their portfolio. These funds provide exposure to a diversified range of stocks, including Berkshire Hathaway, allowing you to benefit from its performance while spreading risk across multiple companies. Examples include iShares U.S. Financial Services ETF (IYG), Financial Select Sector SPDR Fund (XLF) and Vanguard Financials ETF (VFH).
Mutual Funds: Explore mutual funds that have holdings in Berkshire Hathaway. These funds are managed by professional portfolio managers who select stocks based on their investment strategy. Examples include Vanguard Mega Cap Index Fund Institutional Shares (VMCTX), FPA Queens Road Value Fund (QRVLX) and Fidelity Advisor Balanced Fund Class A (FABLX).
Learn more: Best Investment Options
