Since its trading debut in 2011, Bitcoin has consistently delivered an impressive average annual return of approximately 104%, significantly outpacing the returns of Warren Buffett’s portfolio and U.S. stock markets. This comparison highlights the stark differences in risk-reward profiles and performance over varying timeframes between Bitcoin and traditional investment strategies.
Warren Buffett’s Portfolio: Steady Growth with Lower Risk
Warren Buffett’s portfolio, with top holdings including Apple, Bank of America, American Express, Coca-Cola, and Chevron Corp, has demonstrated a compound annual growth rate (CAGR) of 10.03% over the last 30 years. According to Lazy Portfolio ETF, this portfolio has a standard deviation of 13.67%, indicating less volatility compared to general U.S. stock portfolios which have offered similar returns but with higher volatility.
Buffett’s investment philosophy emphasizes long-term value investing, prudent risk management, and a preference for fundamentally strong companies, which has resulted in impressive returns with manageable risk.
Bitcoin’s Extraordinary Performance
In stark contrast, Bitcoin’s performance since 2011 has been extraordinary. With a CAGR of around 104%, Bitcoin has outperformed Buffett’s portfolio and U.S. stock portfolios on an annual basis over the past 13 years. This performance also eclipses the returns of gold, which has delivered an average annual return of 6% during the same period.
Bitcoin vs. Gold
Gold, known for its stability and role as a hedge against economic downturns, has offered modest returns compared to Bitcoin. Many investors view Bitcoin as “digital gold,” perceiving it as a hedge against inflation and currency devaluation. This perception has increased Bitcoin’s appeal, leading several U.S. companies, including MicroStrategy and Tesla, to add Bitcoin to their reserves. Additionally, the launch of spot Bitcoin exchange-traded funds (ETFs) has further solidified its status among institutional investors.
Also Read: Bitcoin’s Market Cap Surpasses Combined Total of World’s Top 3 Banks
Risk and Volatility Comparison
Despite its impressive returns, Bitcoin remains highly volatile, with prices subject to extreme fluctuations. However, in recent years, Bitcoin’s volatility has decreased, even becoming lower than that of many S&P 500 stocks, such as Tesla, Meta, and Nvidia.
The Buffett Portfolio represents a more conservative, long-term strategy with consistent returns and manageable risk. Despite this, it includes exposure to a pro-crypto neobank, Nu Holdings. In contrast, Bitcoin has provided significantly higher returns but with considerable volatility and several major downturns over the past 13 years.
