Warren Buffett is well-known for his quality- and value-driven style of investing. He has referred to one Vanguard ETF in particular as the best option for most investors.
Renowned investor Warren Buffett has for decades spoken about the benefits of long-term, low-cost, fundamentals-based investing. The largest positions in the portfolio of his Berkshire Hathaway (BRK.A 1.42%) (BRK.B 1.15%) are Apple (AAPL 0.40%), American Express (AXP +0.97%), and Bank of America (BAC +1.73%). All are quality companies with healthy balance sheets, lots of cash flow, and strong positions within their industries.
Some investors looking to follow the Buffett style are willing to spend the time researching and studying individual stocks. But what about the people who simply want to invest without all of the work?
Buffett has a suggestion for those folks, too.
In many cases, he thinks investors need to keep it simple, diversified, and cheap. The one place he’s consistently said people should invest is the S&P 500 (^GSPC +0.19%). That makes the Vanguard S&P 500 ETF (VOO +0.12%) a true Buffett-endorsed investment idea.
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Why Warren Buffett likes the S&P 500
Not only has Buffett touted investing in the S&P 500 as the best long-term option for most investors, it’s a strategy he advocates for his wife after his death.
In his 2013 letter to Berkshire shareholders, Buffett wrote:
… ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.
My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. … 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 suggest Vanguard’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.
With this quote, Buffett emphasizes something that he’s insinuated for years. High fees and emotional decision-making are the two biggest factors that can damage investor returns. Instead of trying to beat and/or time the market, simply buy and hold a diversified portfolio of the biggest and best U.S. companies and pay next to nothing for doing so.
His endorsement of Vanguard and VOO — which launched in 2010 — aligns with that philosophy. The simple and cheap approach utilized by Vanguard tends to do the best job for the majority of people.
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