I understand you think in a year the price of BRKB will be more attractive and there is a chance
that if I buy at today’s price I may incur a loss after a year. Perhaps I can start buying,
allocating 25% of my planned investment this year (using Dollar cost averaging or similar) and 75% next year.
Will this be reasonable if the above assumption is correct?
As others noted, nobody knows what the price will be in a year. Prices can do anything in the short term.
With EVERYTHING there is a chance that the first year will be negative.
And also yes, Berkshire is unusually predictable compared to other things, within that chaos.
If you average the observed price over a stretch for many months, it’s not hard to have a somewhat reasonable expectation of what that will be.
My forecasts of average prices “around” a year later are within a few percentage points maybe 2/3 of the time.
That’s mainly because the valuation swings aren’t that wide.
Berkshire’s price since 2008 has been between 1.19 and 1.48 times peak-to-date known book-per-share 70% of the time. Median 1.363.
That’s not a very wild range.
Sure, buying over time makes some sense.
If you want to be fancy about it, here’s a thought:
Make a few monthly purchases. Pick a number of months that suits your level of patience.
Scale their sizes based on the price-to-book ratio at the time of each purchase.
At 1.50 time known book value as it is now, buy only a small amount. Not more than maybe 10% of your cash pile? Maybe 15%?
At 1.25 times known book value, just invest the rest of what you have available and be done with it.
And in between, buy in-between amounts, till you’ve deployed your money.
Keep half an eye for a market plunge. If you hear headlines like panic, rout, Armageddon, and
the mere notion of buying stocks that have been falling in price makes your stomach quake, that’s the ideal time to buy.
The icing on the cake would be a headline on Barron’s saying something like “Equities can never recover”.
The price will probably drop some more after you buy. Ignore that, it won’t last.
But don’t lose sleep over it.
Imagine Berkshire manages about inflation plus 7-8%/year in the next decade, roughly a doubling in value in real terms.
Even if you overpay by 5%, you still get a 95% gain instead of 100%.