Warren Buffett is perhaps the most successful and celebrated investor of the 20th century and his results have only been getting better as he ages.

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Of course, that’s largely due to his ability to pick stocks that outperform the market.

But during his lifetime, the stock market has actually gone up quite a bit, despite the dot com and financial crisis.

Anyone who bought and hold would be doing quite well as well. You don’t necessarily need to pick the best stock winners.

Simply getting exposed to the overall market in a diversified manner would have given you solid returns over time.

In fact, that’s exactly what Warren Buffett recommends and is doing himself.

On page 20 of The 2013 Berkshire Hathaway Annual Report to Shareholders (PDF), he talks about how he is allocating 90% of his estate for his heirs to be invested in the S&P500 index fund – and that’s what he recommends to the average investor.

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What This Means For You

Warren Buffett’s favorite investing strategy can be essentially boiled to a few key takeaways:

1) Buy a low-cost index fund – either through ETFs such as SPY or VOO — or directly with Vanguard.

2) Buy in pieces over a period of time (dollar-cost-averaging)

3) Hold.

In his annual report, Buffett specifically recommends the Vanguard S&P500 Index Fund.

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Warren Buffett, known as one of the most successful investors of all time, has consistently espoused the benefits of investing in index funds as a way to build wealth over the long term. This simple yet effective investment strategy has not only made Buffett a billionaire but has also helped countless individuals achieve financial success. In this article, we will delve into Buffett’s best investment advice: buy index funds.

Index funds are a type of mutual funds that track a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. By investing in an index fund, one is essentially buying a small piece of the entire market, which provides broad diversification and helps reduce risk. This approach allows investors to benefit from the overall growth of the market without having to pick individual stocks.

Buffett has long been a proponent of index funds, often citing their low costs and simplicity as key advantages. He once famously bet $1 million that an S&P 500 index fund would outperform a portfolio of hedge funds over a 10-year period, a bet he ultimately won. This serves as a testament to the power of index funds and the importance of keeping investment costs low.

One of Buffett’s key pieces of investment advice is to stay invested in index funds for the long term. He believes that trying to time the market or pick individual stocks is a fool’s errand, as it is nearly impossible to consistently beat the market over the long term. Instead, he recommends buying and holding index funds for years, if not decades, to take advantage of the power of compounding returns.

Another important aspect of Buffett’s investment philosophy is to remain disciplined and avoid emotional decision-making. He often cautions against panic selling during market downturns, as this can lead to selling low and missing out on potential gains when the market eventually recovers. By staying invested in index funds and maintaining a long-term perspective, investors can ride out market volatility and benefit from the market’s natural tendency to rise over time.

In conclusion, Warren Buffett’s best investment advice is to buy index funds and hold them for the long term. This simple yet effective strategy has proven to be successful for Buffett and countless other investors who have followed his lead. By investing in index funds, individuals can benefit from broad diversification, low costs, and the power of compounding returns. So, if you are looking to build wealth over time, consider taking Buffett’s advice and investing in index funds for a secure financial future.