Why do investors revere Warren Buffett?

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Warren Buffett on NBC News' "Today" show in October.

Warren Buffett on NBC News’ “Today” show in October.

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com.

Q: Why is Warren Buffett such a revered investor?

A: Investors love consistency. That’s not just the case with stocks and companies, but with money managers, too.

Warren Buffett’s big claim to fame is his long-term track record. Buffett has been in the investing game a very long time and has solid long-term performance to show for it. Shares of Berkshire Hathaway’s class B shares are up more than 400% since the beginning of 1997, handily topping the nearly 150% increase of the Standard & Poor’s 500 since that time (excluding dividends).

Investors are also attracted by Buffett’s simple stock selection guide, based on studying the fundamentals of companies. Buffett’s annual reports to shareholders have become must reads for investors.

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Just because Buffett is so respected, though, doesn’t mean you should invest in Berkshire. Not necessarily. As the company gets bigger, it needs larger investments to make a difference. Shares of Berkshire Hathaway have lagged the S&P 500 over the past five years, rising 85%, short of the 100% gain of the S&P 500. Additionally, the S&P 500 pays a roughly 2% annual dividend, while Berkshire Hathaway pays no dividend.

Additionally, there are concerns over how well Berkshire will perform once Buffett gives up the leadership of the company. Buffett, 84, has said the company has succession plans in place. But there’s only one Warren Buffett.

Courtesy of USA Today

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