How to Buy Berkshire Hathaway Stock
Then, How to Buy Berkshire Hathaway Stock?
Examine Berkshire Hathaway's Financial Situation
Berkshire Hathaway ranks among the top ten largest publicly traded firms in the United States, with a market valuation of more than $600 billion. If it were a mutual fund, it would be the largest fund on the planet. Berkshire Hathaway has investments in many companies, such as Coca-Cola, American Express, and Bank of America. It also runs a number of large subsidiaries, such as GEICO, Dairy Queen, and Clayton Homes.
But just because it owns a lot of prominent names doesn't mean you shouldn't do your homework to make sure a possible Berkshire investment is good for your portfolio. When purchasing a stock such as Berkshire Hathaway, you should always start by reviewing its financial records, beginning with its annual reports (Form 10-K) and quarterly reports (Form 10-Q). In the financial press, these reports are sometimes called earnings reports or quarterly earnings. They are a summary of how the company has done in the last few months.
You can locate them on Berkshire Hathaway's investor relations website or in the Securities and Exchange Commission's EDGAR database. For more information on these financial filings, look into expert analysis such as those found on Fidelity, Morningstar, or Forbes.
Determine Your Investment Objectives
Before you begin purchasing Berkshire Hathaway stock, be sure that your investment objectives are aligned with those of the company.
Is your major motivation for investing, for example, to increase the value of your portfolio? If so, Berkshire Hathaway may be a suitable fit. Since 1965, the company has generated an average annual return of 20%, over double the annual return of the S & P 500. Even though past performance is no guarantee of future success, BRK could be a great choice for investors who want to buy and hold for a long time.
If, on the other hand, you wish to produce passive income through dividends, you should look for another investment. Berkshire Hathaway hasn't issued a dividend since 1967, preferring to reinvest profits to develop its businesses.
Choose whether or not you want BRK.
BRK.A vs. BRK.B
Berkshire Hathaway's stock is available in two varieties: BRK.A and BRK.B. You must decide which to include in your portfolio. Berkshire Hathaway's initial common stock offering was BRK.A. (originally it was just BRK). As of July 2022, BRK.A was trading at a whopping $409,000 per share.
In the 1990s, when a share of Berkshire Hathaway was worth about $30,000, Warren Buffett decided to make a second class of shares instead of splitting the stock to make more shares and lower the price of buying into Berkshire Hathaway.
Except for the enormous price difference, BRK.A and BRK.B are virtually identical. BRK.B is substantially more inexpensive at $272 per share. Before fractional share investing, investors had to pay full price for whole shares of BRK.A or BRK.B. This difference was probably most important back then.
It's also worth noting BRK.
A shares actually have many more voting rights than B shares, which is reasonable given their much higher price and the opportunity to convert to class B shares at any time. It is not possible to convert class B shares into class A shares.
Choose a Brokerage Platform
Once you've decided on the type of shares you want, you'll need to decide where to acquire them. If you already have a brokerage account, the simplest option is to stick with your current supplier. However, if you do not have an account outside of an employer-sponsored retirement plan, we recommend that you look at our list of the finest online brokers. When evaluating choices, simply ensure that the platform offers the type of account you desire, whether it's an IRA or a taxable investment account.
You'll also want to make sure it offers commission-free trading of US equities, as most big brokerages do now, and that it has solutions to assist you reach any other financial or investment goals, such as fractional share investing or tools to help you save and invest smarter.
Establish Your Investment Budget
Even Warren Buffett does not have an infinite amount of money to dedicate to Berkshire Hathaway. To determine how much to invest in BRK.A or BRK.B, consider the following four factors:
What is your financial situation? Never invest the money that you need to cover your expenses. After you've set aside funds for these and an emergency fund, if you don't already have one, you can invest any remaining funds to achieve your wealth-building objectives.
What is the current value of BRK.A or BRK.B? Of course, with fractional shares, BRK's price is less important, but if your brokerage does not enable you to buy sections of full stocks, you'll most likely need to target BRK.B shares.
What is your investment plan? People typically invest in one of two ways: they either put down a substantial initial sum, or they invest in lesser amounts over months and years. This second method, known as dollar-cost averaging, can help you pay a lower average price per share overall while also lowering the level of risk you take on at any given time.
What about the rest of your investments? BRK is probably not your first or only investment. You should consider how it fits in with your other assets and strategies.
Choose an order type and place your order.
It's time to create your buy order once you've opened a brokerage account and decided when to invest. You can use a market order to buy your shares at the current price whenever you place your order if you want to keep things simple.
If you're a more educated investor or just want to invest if you can buy shares at a specified price, try using a limit or stop-limit order, which only executes trades when certain pricing criteria are met. Just keep in mind that if you do this, the stock may move away from the price you set as your limit, which means you may not end up with any shares.
Performance of Berkshire Hathaway
Investing is not a one-time event. Check on how your Berkshire Hathaway investment is doing over time to make sure you're on track to reach your goals and decide if you want to buy, sell, or keep your BRK investment steady.
First, determine its annual return rate. This way, you'll have a data point to compare to other equities and benchmarks, such as the S&P 500 and the Nasdaq Composite Index. You might also want to go back and look at the core data you looked at previously to see how these values change over time.
Selling Berkshire Hathaway Stock
If you decide you want to leave Berkshire, selling your shares is just as simple as buying them. Again, you can sell at the market price or use stop or limit orders if you only want to sell at or above a specific price.
More importantly, while selling, you must keep taxes in mind. You don't have to worry about this if you purchased your shares through a retirement plan. However, if you purchase your shares in a regular brokerage account and expect to profit, you may be subject to capital gains taxes. (However, if you sell at a loss, you may be able to claim it for tax-loss harvesting purposes.)
If you expect to make a lot of money, consult with an accountant to be sure you understand the tax implications.
Other Options for Investing in Berkshire Hathaway
Berkshire Hathaway is a massive corporation. It is the ninth largest component of the S & P 500 on its own, so almost any large-cap index fund or exchange-traded fund (ETF) will have some exposure to BRK.
These funds can be excellent investments for long-term passive investors, such as those saving for retirement. They not only provide you with the growth potential of hundreds of firms, but they also reduce the danger of losing money on any one investment.