[DesertCat]

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For American investing, I like to compare the 40 plus years performance of Berkshire Hathaway to the S&P 500.

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Don't compare Berkshire Hathaway to a mutual fund. Buffett has never run a mutual fund and never will, as he feels they are greatly handicapped. In fact, don't you realize that Buffett recommends index funds to most investors?

The problem with mutual funds are they are constrained by their size, forced over-diversication, limits on investment types, a shareholder base that forces them to sell holdings at the worst possible times and their high fees and poor incentives.

You don't seem to understand much about Mutual Funds, or you have bought a line of bull that some mutual fund manager has sold you. They don't offer better down market performance. 20% don't beat the S&P 500 over reasonable time periods (5-10 years) it's actually closer to 5%.

And the very very few who do beat indexes over long periods, like Bill Miller, are great investors, but unlikely to repeat that feat because they grow too large and can no longer buy the most attractive stocks. The best ones (Sequoia) have already closed their doors to new investors. In Bill Millers case, he now is forced to buy companies with market caps that are at least a few billion, so he's being forced to buy only in the most efficient and highly researched parts of the market. His record the next ten years ain't going to match the last ten years.

Buffett used to kill the indexes, now he just hopes to beat them. He's dragging a huge anchor of size now. His advantage over mutual funds is he doesn't have to deal with redemptions, and doesn't need to be heavily diversified, and can invest without restriction in many interesting markets (junk bonds, currencies) when stocks are too expensive.

The best structure for investing is a private investment partnership that forces investors to stay committed for long periods of time, and rewards the managers for outperformance, not just breathing. Hedge funds typically have structures like that, though many also have fees that are too high.

As Buffett has said, if you understand value investing, and are a small investor, you should have no problems beating the indexes on your own. If not, buy an index fund.