In his seminal paper on portfolio management, Harry Markowitz had identified risk and return as the two most important variables in investment decision making. Any rational investor is supposed to minimize his risks, while maximising his return. However, risk and return go hand in hand. Hence, most of the times, it is extremely difficult to find investments that give superior risk-adjusted returns. This is not to say that there aren't any such investments available. Warren Buffett-led Berkshire Hathaway (NYSE:BRK.B) is one investment which has given superior risk-adjusted returns.
Over the last decade, Berkshire stock has returned around 132%, almost double the 68% return provided by the S&P 500. From 1964 through 2016, Berkshire's compounded annual growth is 20.8%, more than twice the annual gain of the S&P 500 index during the same period. Overall, Berkshire stock has returned a mind-blowing 1,972,595%.
