Key insights
- The article highlights Warren Buffett's recommendation for investors to own the S&P 500 index fund for diversification and long-term growth. It mentions ETFs like SPY and VOO as investment vehicles. The S&P 500's historical average annual return of nearly 12% supports this strategy. This reinforces a bullish outlook for US equities, particularly for passive investment strategies.
Warren Buffett, the "Oracle of Omaha," was born in 1930 and has spent decades establishing himself as one of the great minds in investing. While he reportedly loves Coca-Cola, and has invested heavily in the company, there's another investment Buffett says every investor should own -- the S&P 500 (^GSPC 1.51%).
The S&P 500 tracks about 500 of the largest U.S. companies, including Nvidia and Broadcom. Rather than choosing individual stocks, crossing your fingers, and hoping you're right, the S&P 500 allows you to spread your risk by investing in many different companies. The cherry on top is that it leaves you with more money to invest each year.
While you can't buy shares of the S&P 500 directly because it's a measuring tool, you can invest in the index fund through exchange-traded funds (ETFs) like the SPDR S&P 500 ETF (SPY 1.43%) or the Vanguard S&P 500 ETF (VOO 1.45%).
Buffett's approach may not be sexy or exciting enough for some investors, but it's a proven winner long term. Over the last 50 years, the average annual return of the S&P 500 has been 11.992%, assuming dividends are reinvested and excluding inflation.
Here are some of the advantages of the S&P 500 and reasons Buffett's advice may make sense for you:
As you plan for retirement, Buffett's recommendation essentially boils down to this: Remain diversified and invest for the long term. The S&P 500 may help you do that.