Not that long ago, Warren Buffett had the financial media in an uproar. He delivered some excellent material in regards to Investing 101 by sharing his plans for how he would care for his wife financially once he was gone.
What did Warren Buffett suggest? Was it to buy Berkshire Hathaway stock? Not exactly. A diversified portfolio? No. He said to buy index funds.
Here are Buffett’s exact words:
“My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggestVanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”
The large take away is that one of the greatest investors in the world gave the best potential endorsement for owning simple index funds. Everyone covered this in the news world and they should have. There are not that many great pieces of investing advice for newbies then to buy cheap, diversified funds.
Those investors paying close attention to the details picked up on Buffett’s wise recommendation, which is “I suggest Vanguard’s.”
It’s not shocking that Warren Buffett suggested the big boys of Vanguard index funds. The man loves to get a great deal.
It’s debatable as to whether Buffett meant the Vanguard mutual funds or the Vanguard S&P 500 ETF. What’s not up for any debate is that Vanguard is one of the leading funds that offer a cheap way to invest in a diversified manner. And cheap is important, although it’s not everything. This is especially true if you do not have a lot of money to invest with.