S&P 500, Treasurys or Berkshire Hathaway? Here's where value investor Guy Spier would put his money

Published Thu, Aug 17 20238:33 PM EDT

Investors are almost spoilt for choice between the safety of bonds and the potential upside of stocks. On the one hand, the U.S. economy is showing signs of healthy growth, and some analysts expect stocks to continue soaring. Simultaneously, U.S. government bonds offer more than 5% in risk-free yield. Renowned value investor Guy Spier weighed in on CNBC's Pro Talks on whether it's better to put your money in an S & P 500 index fund , in U.S. Treasurys , or in shares of Berkshire Hathaway for the long run. Spier, who calls himself an "ardent disciple" of legendary investor Warren Buffett and follows his principles, manages the $350 million Aquamarine Fund — a portfolio inspired by the original 1950s Buffett Partnership era . Asked whether he would invest in the S & P 500 or Buffett's Berkshire Hathaway stock for the rest of his life, Spier said the question poses a false choice that investors don't need to make. "It is perfectly reasonable to own both," Spier said. "I think that if I were in [the questioner's] shoes, I might imagine myself actually doing this is: those are two extremely good choices." Rather than picking one over the other, Spier suggests dividing the investment 50-50 between the S & P 500 and Berkshire, then rebalancing positions at the end of each year. "Investing for the rest of one's life is the right question. But then we shouldn't tie our hands too much. We do get the ability to make adjustments," he explained. When asked by a 71-year-old investor if a 5% fixed return asset — such as 2-year U.S. Treasurys — is more attractive than risking a percentage in equities, Spier suggested that the answer depends on how flexible individual needs are. "If you need 100% of that [5% return] to live on, and there's no place you could cut your expenditures, then you probably should stay in extremely safe instruments," Spier explained. He nevertheless believes most investors will do better in equities over time, if they don't need all their income immediately and are flexible in cutting expenses if the market suffers an initial fall. Spier says context is valuable in determining the right investment approach. A small risky bet may be acceptable for an investor, if it represents a tiny percent of their overall portfolio. But the same bet could be disastrous, if it accounts for the majority of someone's wealth. "There's a huge difference between somebody making a 1% or 2% bet in their portfolio, but they might talk about it a lot because it's fun to talk about, and it's totally valid as a 1 or 2% bet, but not as a 50 or a 60% bet," Spier noted. He urges investors to consider their full financial picture and required income before deciding how much risk to take. Spier's fund has posted an annualized return of 9% since he started it in 1997, according to Aquamarine. That compares to the S & P 500 ′s 8.2%, the MSCI World 's 6.9%, and the FTSE 100 ′s 3.6%.