Warren Buffett's advice for everyday investors is simple. But it's a powerful long-term wealth creator.
Warren Buffett's advice for everyday investors is simple.
But it's a powerful long-term wealth creator.
Even though Warren Buffett owns a portfolio of individual stocks, he's not a stock trader. As most people know, he buys high-quality businesses at attractive valuations and holds them until the narrative plays out.
For retail investors, however, that's not what Warren Buffett recommends. Sure, some folks have the time and the skill set to do deep research on companies and identify similar opportunities. But most people don't. They want to do the right thing and set aside money for longer-term goals like retirement. For them, simplicity is the better path.
That's why Buffett has long advocated that retail investors simply buy into an ultra-low-cost S&P 500 index fund, make regular monthly investments, resist the urge to sell everything when the market turns volatile, and keep that money invested for years, if not decades.
It's perhaps the easiest way for regular investors to accumulate long-term wealth. And if investors can maintain the discipline to continue following this plan, even small monthly investments can turn them into millionaires.
Why Warren Buffett recommends the S&P 500
While Buffett has built up his net worth by targeting individual companies, he generally advises against everyday investors trying to do the same thing. Instead, he believes they should simply own the U.S. stock market and participate in the long-term growth of the U.S. economy. This helps avoid the risk of any one company affecting the overall portfolio and allows you to participate in the evolution of the U.S. economy without making radical portfolio changes.
In his 2013 letter to Berkshire Hathaway shareholders, Buffett revealed the plans he had laid out for his wife's inheritance:
"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."
Averytin News Financial update.