Buffett's biggest moneymaking ETF
Berkshire owns 39,400 shares of the SPDR S&P 500 ETF Trust (NYSEMKT: SPY), which is currently valued at nearly $22.6 billion. It also owns 43,000 shares of the Vanguard S&P 500 ETF (NYSEMKT: VOO), valued at nearly $22.7 billion.
With an expense ratio of just 0.03%, it's among the least costly ETFs available, allowing investors to keep more of their returns. This cost-efficiency, combined with its broad market exposure, has made VOO a favorite among both novice and experienced investors alike.
While your investing choices are personal, there's one option that comes highly recommended by billionaire investor Warren Buffett: The S&P 500 index fund. Here's why it's such a fantastic investment, and how you could earn hundreds of thousands of dollars while barely lifting a finger. Image source: The Motley Fool.
Vanguard S&P 500 ETF
The investment conglomerate also wholly owns several private businesses, and it has a $325 billion cash pile, which Buffett and his team can put to work when they spot new opportunities.
There are 214 ETFs which contain Berkshire Hathaway, Inc.. All of these ETFs are listed in the table below. The ETF with the largest weighting of Berkshire Hathaway, Inc. is the SPDR S&P US Financials Select Sector UCITS ETF.
SPY has an expense ratio of 0.09%, which, while low, is still higher than that of VOO,'s 0.03%, one of the lowest expense ratios for S&P 500 ETFs. This makes VOO more cost-effective for long-term investors, as expense ratio differences compound over time and impact returns.
Warren Buffett's Berkshire Owns 2 ETFs: SPY and VOO
SPDR S&P 500 ETF Trust SPY. Vanguard S&P 500 ETF VOO.
Warren Buffett has long recommended a low-fee S&P 500 tracker fund to amateur investors. Chamath Palihapitiya says it's become riskier as a few stocks now have an outsize pull on the index. Buffett mostly steers clear of tech names, but Apple has been his No. 1 stock for years.
Average Return
In the past year, QQQ returned a total of 25.74%, which is slightly higher than VOO's 24.33% return. Over the past 10 years, QQQ has had annualized average returns of 18.26% , compared to 13.04% for VOO. These numbers are adjusted for stock splits and include dividends.
Trust a Low-Cost Index Fund for Your Portfolio
For instance, Buffett urges the average investor to purchase index funds. “Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund,” he wrote in his 2013 letter to Berkshire Hathaway shareholders.
VOO has a lower expense ratio than VOOG by 0.07%. This can indicate that it's cheaper to invest in VOO than VOOG. VOO targets investing in US Equities, while VOOG targets investing in US Equities. VOO is managed by Vanguard, while VOOG is managed by Vanguard.
QQQ is more expensive with a Total Expense Ratio (TER) of 0.2%, versus 0.1% for VGT. QQQ is up 26.05% year-to-date (YTD) with +$21.91B in YTD flows. VGT performs better with 28.75% YTD performance, and +$5.79B in YTD flows.
The 90/10 rule in investing is a comment made by Warren Buffett regarding asset allocation. The rule stipulates investing 90% of one's investment capital toward low-cost stock-based index funds and the remainder 10% to short-term government bonds.
To become a millionaire through investing in an S&P 500 ETF, investors need to start early and consistently add to their investments in good markets and bad. That is the key to long-term wealth building.
Among all the gems he's passed along, one piece of advice always remains the same: Most people only need to invest in the S&P 500 over the long term to build wealth. Berkshire Hathaway owns close to 50 stocks, but the one Buffett always steers investors toward is the Vanguard S&P 500 ETF (NYSEMKT: VOO).
He has often repeated that advice, and has specifically suggested the Vanguard S&P 500 ETF (NYSEMKT: VOO). Here's how that advice could turn $500 invested monthly into $986,900 over 30 years.
SPDR S&P 500 ETF Trust
VOO is less expensive with a Total Expense Ratio (TER) of 0.03%, versus 0.0945% for SPY. VOO is up 25.5% year-to-date (YTD) with +$115.06B in YTD flows. SPY performs worse with 25.4% YTD performance, and +$12.34B in YTD flows.
Berkshire exited its position in STORE Capital in 2022. According to the latest 13F filing with the Securities and Exchange Commission, there's no publicly traded REIT in Buffett's portfolio.
For example, you might buy SPY if you want to trade actively, or even venture into day trading, because of its high volume. You might consider buying VOO to hold over the long term because of its lower expenses.
It does pay a dividend, because it contains blue-chip stocks that are often reliable dividend stocks. All of the Dividend Aristocrats, a set of companies that have raised their dividends at least once a year for at least 25 years, are S&P 500 members, and thus VOO has exposure to all of them.