As one of the most famous investors of all time, when you get some Warren Buffett investment advice, you may want to heed it. The billionaire CEO of Berkshire Hathaway, one of the richest people in the world, has garnered the nickname “The Oracle of Omaha” due to his legendary investment decisions and prowess in the stock market and beyond.
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His company Berkshire Hathaway, which is essentially a holding company for his investments, has a competitive advantage with him at the helm as it more than doubled the return of the S&P 500 over an incredible 60-year period, an enviable record that has brought him much acclaim.
Yet, for most investors, Buffett is a huge proponent of low-cost index funds. Why has Buffett repeatedly said this, and how well has the S&P 500 done? Here are some investment tips from the man himself, to hopefully help you grow your net worth.
In his long and storied career, Buffett has endorsed low-cost mutual funds numerous times. Here are just a few key principles from his quotes on the matter:
In 1993, Buffett told his shareholders: “By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals. Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.”
In 2020, he continued to endorse the S&P 500 at the Berkshire Hathaway annual meeting, telling shareholders, “In my view, for most people, the best thing to do is to own the S&P 500 index fund. People will try and sell you other things because there’s more money in it if they do.”
In “The Little Book of Common Sense Investing,” by Vanguard founder and former CEO John Bogle, Buffett said, “A low-cost index fund is the most sensible equity investment for the great majority of investors.”
In one of his most direct messages, Buffett outlined his philosophy to Becky Quick on CNBC’s On the Money: “Consistently buy an S&P 500 low-cost index fund. I think it makes the most sense practically all of the time… Keep buying it through thick and thin, and especially through thin.”
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As befitting such a legendary investor, Buffett put his money where his mouth was in 2007, betting $1 million that the S&P 500 would outperform hedge funds over the following 10 years. Ted Seides, a hedge fund manager at Protégé Partners, accepted the wager and picked five hedge funds he said would outperform the S&P 500 over the next decade.
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