Many people assume that the world's most successful investors rely on advantages unavailable to ordinary investors — superior information, sophisticated models, or insider networks. Warren Buffett spent 60 years disproving that assumption, building one of history's greatest fortunes through patience and simplicity rather than complexity.

When asked what people should do with their money, Buffett's answer has remained consistent for decades. It is not a stock tip, nor a sector call. It is an ETF that anyone can purchase for three cents on every hundred dollars invested.

What Warren Buffett Actually Recommends

Buffett has clarified his position repeatedly through shareholder letters, interviews, and annual meetings. In his 2016 shareholder letter, he wrote: "My regular recommendation has been a low-cost S&P 500 index fund." At Berkshire's 2021 annual meeting, he stated: "In my view, for most people, I think that the best thing to do is buy an S&P 500 index fund."

The most direct version of this guidance appeared in his 2013 letter to Berkshire Hathaway shareholders, where he described the instructions written into his will for the money he would leave to his wife: "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," according to The Motley Fool.

This was not modesty — it was precision. Buffett, who beat the market by an enormous margin over six decades, was stating that for his own wife's trust, a simple index fund would outperform most professional managers. It is worth noting that Buffett's guidance is directed at investors who do not have the time, expertise, or inclination to evaluate individual companies — a group that includes the trustee managing his wife's inheritance. Berkshire Hathaway itself, by contrast, remains an actively managed conglomerate.

Why the Vanguard S&P 500 ETF Fits Buffett's Prescription

The Vanguard S&P 500 ETF (VOO) tracks the S&P 500, charges an expense ratio of 0.03% per year, and has grown to more than $950 billion in assets since its launch in September 2010. That equates to three cents on every hundred dollars invested, or $3 annually on a $10,000 investment. This is precisely what Buffett means when he emphasizes low cost, and why he specifically names Vanguard when asked which fund to choose. Vanguard's structure as an investor-owned company is a key reason it can sustain fees at this level — its funds are operated at cost for shareholders rather than for outside owners seeking profit.

VOO provides exposure to 500 of America's largest companies across all 11 sectors of the economy, spanning technology and healthcare to energy and consumer staples. Its top holdings include Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), and Alphabet (GOOGL). Components that deteriorate over time are removed and replaced by the S&P Dow Jones Indices Index Committee, which rebalances the index quarterly, allowing it to self-correct without any action required from the investor.

Over the past decade, VOO has averaged approximately 15% annual growth. Investors who held through the 2020 crash and other downturns captured those returns, while many who sold locked in losses they never recovered.

How Buffett's Portfolio Reinforces Buy-and-Hold

Buffett's buy-and-hold advice reflects how he has invested throughout his career at Berkshire Hathaway (BRK-B). He first purchased Coca-Cola (KO) in 1988, and by 1994, Berkshire had spent $1.3 billion to complete its position. The annual dividend from that holding grew from $75 million in 1994 to $704 million by 2022. The position is now worth approximately $30 billion and represents about 9% of Berkshire's portfolio. He never sold.

American Express (AXP) follows a similar trajectory. Buffett's interest dates to the 1960s, and Berkshire completed its purchases in 1995 for $1.3 billion. Annual dividends grew from $41 million to $302 million, and the position is now worth nearly $46 billion — roughly 22% of the portfolio. Again, he never sold.

His underlying message is straightforward: time in the market, combined with low costs, does most of the work. The temptation to trade, rotate, and optimize is typically what undermines returns.

Active Management vs. Index Funds: The Data

Buffett's skepticism toward active management is supported by data. Over the past 10 years, more than 85% of large-cap mutual funds available to U.S. investors have underperformed the S&P 500 after fees. Over 15 years, nearly 90% of those funds trailed the benchmark, according to The Motley Fool, citing S&P Dow Jones Indices data. This persistent gap has fueled a multi-year shift in investor behavior, with hundreds of billions of dollars flowing out of actively managed mutual funds and into low-cost index funds and ETFs.

In 2007, Buffett put $1 million behind that argument with a bet against Protégé Partners, a fund-of-funds firm. He wagered that a simple Vanguard S&P 500 index fund would outperform their hand-picked selection of five hedge funds over ten years. By 2017, the index fund had returned 125.8% for the decade. The five hedge funds returned 21.7%, 42.3%, 87.7%, 2.8%, and 27%, respectively. Buffett donated the winnings to Girls Inc. of Omaha.

For long-term investors, the evidence points in the same direction Buffett has indicated for decades. VOO offers broad exposure to the U.S. economy, an extremely low expense ratio, and decades of endorsement from one of history's most successful investors.

This story was originally published by TheStreet on Aug 2, 2026.