Buffett’s Paradox: The Small Investor’s Advantage

Gentlemen, let us speak frankly. The name Buffett rings like a golden bell, doesn’t it? A fellow who turned pebbles into palaces, so to speak. Sixty years he’s been at it, Berkshire Hathaway growing from a modest undertaking to a… well, a rather substantial heap of assets. A 5.5 million percent gain! It’s enough to make a lesser man weep with envy. But here’s a peculiar truth, a delightful irony. The man himself, the oracle of Omaha, secretly envies those of us with less to deploy.

You see, the larger the vessel, the more sluggishly it turns. Berkshire’s most spectacular leaps – the years 1968, 1971, 1976, and so on – occurred when it was but a nimble skiff, not the ocean liner it is today. A fact Mr. Buffett acknowledged as early as 1994, a man of foresight, that one. He predicted, with the certainty of a seasoned gambler, that future gains would be… less enthusiastic. A most sensible fellow, to admit such a thing!

The law of large numbers, naturally, plays a role. It’s easier to multiply a handful of kopeks into rubles than to transform a fortune into an even larger one. But there’s more to it than mere arithmetic. As Buffett himself confessed in 1999 – and this is where the real wisdom lies – having too much money is a handicap. “I think I could make you 50% a year on $1 million,” he declared, with a mischievous glint in his eye. “I guarantee that.” A bold statement, wouldn’t you agree? It suggests a certain… impatience with the limitations of vast sums.

Imagine, if you will, Berkshire Hathaway discovering a promising little company, investing a mere $100 million, and turning it into a billion-dollar enterprise. A handsome profit, certainly. But for a conglomerate with over $380 billion in cash, it’s a mere ripple in the ocean. For a small investor, however, such a return would be… transformative. A new dacha, perhaps? A trip to the Riviera? The possibilities are endless.

And let us not forget the bureaucratic hurdles. Should Berkshire wish to acquire more than 5% of a promising venture, it must file a Schedule 13D with the Securities and Exchange Commission, a document so dense and complicated it could induce a coma. A small investor, bless his simple heart, is spared such tediousness. A clear advantage, wouldn’t you say?

A Modest Proposal: The Vanguard Small Cap Index

Now, let us turn our attention to a more practical matter. The Vanguard Small Cap Index Admiral Shares (VSMAX). A fund designed to track the fortunes of smaller American companies. It’s not glamorous, mind you. No yachts or private jets are included. But it has, impressively, outperformed its benchmark since its inception in 2000, returning an average of 9.21% per year. A respectable figure, even for a seasoned speculator.

And the best part? The expense ratio is a mere 0.05%. A pittance! Compared to the average of 0.97%, it’s practically a gift. The fund holds 1,324 stocks, with a median market cap of $10 billion. And their average price-to-earnings ratio is 20.8, a nearly 33% discount from the S&P 500’s current ratio of 28.5. A bargain, my friends, a genuine bargain!

So, for those seeking a low-cost, diversified, and surprisingly effective way to profit from the fortunes of smaller companies, the Vanguard Small Cap Index Admiral Shares is a fund worthy of your consideration. It may not make you a billionaire overnight, but it could, with a little luck, provide a comfortable cushion for your retirement. And isn’t that, after all, the true measure of success?

2026-02-02 14:32

A Modest Proposal: The Vanguard Small Cap Index

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