Warren Buffett Explains Why An Index Fund Is His Favorite Investment Vehicle.

Warren Buffett has been in the business of investing for over fifty years, and with all of that experience also comes a vast amount of wisdom. Starting out in the small town of Omaha, Nebraska Warren uses quite a few different methods of investing to grow his money. Warren Buffett is a long-term investor, and in his opinion, if a company is continually turning a profit every year there is no reason to sell.

Warren Buffett recently sat down with CNBC and discussed his one of his favorite methods for investing which is the index fund. The key factors to an index fund are the lowered risk that it carries, especially for brand new investors who are trying to jump into the market but don’t quite know where to start. The index fund carried a much lighter risk because it is made of up multiple stocks instead of just one. This, in turn, lets the different companies balance themselves out, because the risk is being spread across multiple investments instead of just putting all of your eggs in one basket.

Warren Buffett considers the index fund more of a passive form of investing, and instead of consulting with an analyst team you are able to just choose the index fund based on the sectors that its investments in. Index Funds are relatively low maintenance, which makes them a much better choice for the busy Americans who are juggling ten different things and really don’t have the time to be monitoring their investments daily. Warren estimates that the index funds generally return between 7% and 8% and generally cost about 1% to manage. This makes them a much better option and a stellar choice for the new investor who is looking to jump into the market full force with the advice of one of Americas most knowledgeable investors.

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