Warren Buffett is the top investor in the world and one of the richest men in the world. He is well-known for incredible foresight when choosing stocks and companies and investors everywhere watch his moves carefully in order to try and learn from him. So, it’s absolutely no surprise that Buffett’s investment advice is among the most sought-after investing advice in the world.
However, while there are hundreds of questions that most people would probably like to ask Warren Buffett if they could get a private interview, there really is only one piece of advice that you really need from the Oracle of Omaha. In fact, in his 2016 shareholder letter, Buffett discussed what his most-given piece of advice is, and it might surprise you.
According to the Oracle of Omaha, we’d really all be better off investing not in analysts, consultants, or hedge fund managers, but instead by investing money in an index fund.
Over the years, I’ve often been asked for investment advice…” Buffett wrote. “My regular recommendation has been a low-cost S&P 500 index fund.”
In fact, when Buffett outlined what he would prefer to have done with his assets should he pass away before his wife, he instructed that much of the money be put in an index fund. While his wife unfortunately passed away before him, it’s safe to assume that what Buffett would consider good enough for his spouse is probably good enough for the rest of us.
However, Buffett said that whenever he gives this unusual advice there are two reactions: his friends with modest means listen while his wealthier friends instead decided to go with fund managers or consultants. However, while occasionally they will be able to provide good returns, the chances are just as much that they won’t. At the same time, they aren’t likely to recommend an index fund either, whether or not they realize it will have better returns.
“Can you imagine an investment consultant telling clients, year after year, to keep adding to an index fund replicating the S&P 500? That would be career suicide,” Buffett writes in his letter. “Large fees flow to these hyper-helpers, however, if they recommend small managerial shifts every year or so. That advice is often delivered in esoteric gibberish that explains why fashionable investment “styles” or current economic trends make the shift appropriate.”
The long and short of it is that something as simple as putting money in an index fund is not only simple but the better way to handle investments for the majority of people. Buffett’s personal favorite and recommendation is Vanguard.