History has rewarded patient investors who have followed this approach.
When you’ve gained a net worth of over $140 billion and built a trillion-dollar business, people tend to give your advice more weight. That’s why Warren Buffett has long been one of Wall Street’s most respected voices. Even while being ultra-successful, he’s never shied away from providing valuable investing advice for the average investor.
There’s one piece of advice that has remained consistent through Buffett’s career, and that’s that the average investor is better off consistently investing in the S&P 500 as a means of building wealth over a lifetime. He has been quoted as saying, “In my view, for most people, the best thing to do is own the S&P 500 index fund.”
So, if you’re looking for a Buffett-inspired portfolio, look no further than an S&P 500 ETF like the Vanguard S&P 500 ETF (VOO 0.01%). It’s one of the simplest ways to lean into his advice.
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Why should you invest in the S&P 500?
The S&P 500 tracks around 500 of the largest U.S. companies on the stock market, so Buffett sees investing in an S&P 500 fund as a way to invest in the broader U.S. economy. Of course, smaller companies also make up part of the economy, but S&P 500 companies account for a large portion of the U.S. GDP. Below is how it’s split by sector (as of Sept. 30):
- Information technology: 34.8%
- Financials: 13.5%
- Consumer discretionary: 10.5%
- Communication services: 10.1%
- Health care: 8.9%
- Industrials: 8.3%
- Consumer staples: 4.9%
- Energy: 2.9%
- Utilities: 2.3%
- Real estate: 1.9%
- Materials: 1.8%
Buffett is likely not the biggest fan of the high concentration in tech stocks, but he can likely still appreciate the index containing companies from every major sector of the economy. It’s not as diversified as it has historically been, but it still provides instant diversification to investors.
Being able to get exposure to 500 of America’s most influential companies in a single investment simplifies investing. You don’t need to spend time researching dozens or hundreds of companies; you simply invest in the S&P 500 and trust its ability to grow long term.
Today’s Change
(-0.01%) $-0.08
Current Price
$617.09
Key Data Points
Market Cap
$0B
Day’s Range
$615.98 – $618.74
52wk Range
$442.80 – $619.60
Volume
56K
Avg Vol
0
Gross Margin
0.00%
Dividend Yield
N/A
VOO gives you cheap exposure to the S&P 500
Buffett is also a fan of S&P 500 funds being cheap, which is why I went with VOO specifically over the SPDR S&P 500 ETF Trust (SPY +0.08%). VOO’s 0.03% expense ratio is more than three times cheaper than SPY’s 0.0945% expense ratio.
Both are cheap, and a 0.645% difference may seem minimal but it adds up over time. And since both ETFs are essentially the same, you might as well go with the cheaper option of the two.
For perspective, let’s imagine if you invested $500 monthly into both ETFs and they averaged 10% annual returns. The difference in paying 0.03% versus 0.945% in fees over 25 years is over $5,600.
Simple investing that has produced attractive gains
Investing in the S&P 500 doesn’t have to mean sacrificing gains, either. One study by MarketWatch showed that around 65% of actively traded funds put together by Wall Street underperformed the S&P 500 in 2024.
Over the past decade, VOO has averaged around 12.6% annual returns (14.5% including dividends). That means a $500 investment made then would be worth over $1,600 to $1,900 today.
Nobody — including Buffett and Wall Street experts — can predict exactly how a stock will perform, especially in the short term. However, the S&P 500 is well-positioned to continue being an attractive long-term investment. That doesn’t mean there won’t be bumps in the road along the way, but history has rewarded patient investors.
