Steve Ballmer’s investments are not diversified. Rather, Microsoft stock accounts for nearly all of his wealth. Retail investors should keep things simple, the former CEO of Microsoft advised.
Single Stock Strategy
Steve Ballmer, the former CEO of Microsoft, feels that most investors should keep things simple. His own assets are so basic that they primarily consist of a single stock.The Wall Street Journal claims that over 80% of his investments are in Microsoft stock, with the remaining portion going to stock index funds. He said, “Microsoft’s outperformed just about every other asset I could have owned,” in a Sunday Q&A with the Journal. “It’s a little hard to say that it hasn’t worked out.”
In recent years, the S&P 500 has returned roughly 13% on average, whereas Microsoft has returned roughly 29% yearly, including dividends. The AI explosion brought about by Microsoft-backed OpenAI aided in that. Microsoft’s market capitalisation has risen to over $3 trillion since the launch of ChatGPT in November 2022.
Compariaon with S&P 500
Steve Ballmer, who oversaw Microsoft from 2000 to 2014, claimed that Warren Buffett’s counsel that regular investors would be better off putting their money in an S&P 500 index fund than attempting to beat the market had influenced his mindset.
Naturally, the CEO of Berkshire Hathaway does not own 80% of his stock in a single company. However, Steve Ballmer struggled to find money managers who consistently outperformed the market, so he settled on his unconventional approach to investing.
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Now worth $151 billion on Bloomberg Billionaires Index. Steve Ballmer told the Journal that he and his wife changed their index fund to only include the United States and Europe, while they “maybe” own some Japanese assets as well. He is also exiting private equity and focussing solely on the top holding, Microsoft.
I like it. “It’s simple,” he explained. “We’ve been quite fortunate financially. What I want in this case is not to have to invest a lot of time, anxiety, and mental power in an area where we’re lucky to make 7% since that’s the average return on the S&P over the long term.”
Keep It Simple
Steve Ballmer seemed unsure about which index fund he owned, adding that if it’s not the S&P 500, it’s the small-cap Russell 2000 or “some broad mirror of the market.” Meanwhile, his second significant investment, the Los Angeles Clippers, appears to be performing well. He paid $2 billion for the NBA club in 2014, and Forbes estimates it is now worth $5.5 billion.
When questioned if his technique is applicable to average investors, Steve Ballmer answered, “I would say, ‘Keep it simple’—unless you’re really going to become an expert.” According to studies, index funds following the S&P 500 typically outperform most actively managed funds, particularly as US assets have recently dominated global markets.
According to Morningstar data from July, the average share of active funds that outperformed the S&P 500 over the last decade has been 27%. Furthermore, funds with diverse asset classes and locations performed worse than the S&P 500. Cambria Funds reported in June that such portfolios had trailed the benchmark in 13 of the last 15 years.
