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.
Top Warren Buffett Stocks
As of January 2025, these are the top stocks in Berkshire's portfolio by number of shares, based on 13F and other regulatory filings tracked whalewisdom.com: Bank of America (BAC), 766.3 million. Coca-Cola (KO), 400 million. Kraft Heinz (KHC), 325.6 million.
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.
Vanguard's long-term success in active fixed income starts with Vanguard's unique ownership structure. Vanguard is owned by its member funds, which in turn are owned by fund shareholders.
Buffett's biggest moneymaking ETF
Berkshire owns 39,400 shares of the SPDR S&P 500 ETF Trust (SPY -1.53%), which is currently valued at nearly $22.6 billion. It also owns 43,000 shares of the Vanguard S&P 500 ETF (VOO -1.52%), valued at nearly $22.7 billion. Both ETFs attempt to track the performance of the S&P 500.
Despite being the sixth-richest person globally, Warren Buffett continues to drive a 2014 Cadillac XTS he purchased with hail damage. Although he can afford any luxury vehicle, Buffett prefers the practicality of his 10-year-old car.
In the second quarter of 2024, Buffett again bought more shares of Chubb, Occidental, the two Liberty Media Sirius XM tracking stocks, and Sirius XM. He also initiated new positions in aerospace and electronics company Heico and cosmetics retailer Ulta Beauty.
A: Five rules drawn from Warren Buffett's wisdom for potentially building wealth include investing for the long term, staying informed, maintaining a competitive advantage, focusing on quality, and managing risk.
The Coca-Cola Company
Like American Express, Coca-Cola was one of the stocks Buffett highlighted in his latest two letters to Berkshire Hathaway shareholders. It's also Buffett's longest-held position. As he wrote to Berkshire shareholders last year, "When you find a truly wonderful business, stick with it."
Warren Buffett has argued that an investor could be diverse with just 3 stocks in a portfolio. Of course, this is only if you have a strong handle on the companies and know exactly how they are performing, and expected to perform.
Junk Bonds
Junk bonds are high-yield corporate bonds issued by companies with lower credit ratings. Because of their higher risk of default, they offer higher interest rates, potentially providing returns over 10%. During economic growth periods, the risk of default decreases, making junk bonds particularly attractive.
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.
SPY is more expensive with a Total Expense Ratio (TER) of 0.0945%, versus 0.03% for VOO. SPY is up 28.31% year-to-date (YTD) with +$7.13B in YTD flows. VOO performs better with 28.36% YTD performance, and +$103.99B in YTD flows.
The world's most famous value investor is sitting on an enormous cash pile. Warren Buffett's conglomerate Berkshire Hathaway currently holds more than $325 billion in cash and equivalents, according to the firm's quarterly financial statements, most of it in U.S. Treasury bills. Everyone wants to know why.
His collection includes several high-end vehicles such as a Cadillac Escalade, Land Rover Range Rover, Mercedes-Benz S450, Ferrari Pininfarina Sergio, W Motors' Lykan HyperSport, Bugatti Veyron Mansory and Koenigsegg CCXR Trevita.
The billionaire investor and Berkshire Hathaway CEO initially balked at the idea of owning a private jet, but ultimately embraced the luxury and convenience. Warren Buffett nicknamed his private jet 'The Indefensible' – then renamed it 'The Indispensable' after realizing its value.
Zuckerberg recently announced a couple of other new additions to his personal fleet, including a Porsche Cayenne Turbo GT that has been transformed into a minivan, and matching “his and hers” manual Porsche GT3 Touring sports cars.
Warren Buffett has said that 90 percent of the money he leaves to his wife should be invested in stocks, with just 10 percent in cash. Does that work for non-billionaires? As far as asset allocation advice goes, 90 percent in stocks sounds pretty aggressive.
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.
Buffett recommends putting 90% in an S&P 500 index fund. He specifically identifies Vanguard's S&P 500 index fund. Vanguard offers both a mutual fund (VFIAX) and ETF (VOO) version of this fund. He recommends the other 10% of the portfolio go to a low cost index fund that invests in U.S. short term government bonds.