“Investing is forgoing consumption now in order to have the ability to consume more at a later date.” -Warren Buffett, Berkshire Hathaway 2011 Shareholder Report

2012 is off to a great start for stock market investors. The S&P 500 was up 13% for the quarter. In just one quarter the S&P 500 returned more than a seven-year U.S. government bond would have returned over its entire lifetime.

In our letters last year, we said that we believed stocks were priced to offer better returns than bonds. We urged investors to restore balance to their portfolios. Bonds had outperformed stocks by so much that unless investors rebalanced their allocations, bonds became a higher percentage of their portfolios. To bring portfolios back to asset allocation targets, most investors needed to sell bonds in order to purchase equities.