Buffett's Last Will and Testament
This past Saturday, more than 40,000 people made the trek to the mecca of capitalism: Omaha, Nebraska.
For close to seven hours, Warren Buffett and his partner Charlie Munger took questions from the audience of Berkshire Hathaway shareholders.
In addition to answering questions on topics that ranged from health care to his latest sale of IBM shares, Buffett continued, as he had in previous years, to be a big fan of low-cost index funds.
Prior to the start of the meeting, Buffett paid homage to Jack Bogle, founder of the index fund pioneer Vanguard.
Bogle, 88 years old, rose to receive a warm round of applause.
Buffett said that Bogle “has done more for the American investor than any man in the country.”
In fact, Buffett is such a big fan of indexing that upon his death, his advice to his trustee is simple: "Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”
You would think the world’s greatest investor would tell his trustee to invest in some complicated strategy only available to the mega-rich.
He didn’t tell his trustee to invest in “lottery ticket” investments — the ones you invest a small amount of money in to hit it big or lose it all.
I’m talking about doubling your money each month in some option strategy or consistently making 10 times your money by investing in penny stocks.
Because, like Santa Claus and the Easter Bunny, they don’t exist.
Instead, his advice is to invest in something anyone can with a minimum $1,000 investment.
Buffett recommends index funds because he truly believes the results from a low-cost S&P 500 index fund would “be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”
And the facts prove he's correct.
Over the past 15 years, which included both a bull and a bear market, only 25% of U.S. large-company mutual funds outperformed the Vanguard S&P 500 index fund.
Think about all the management fees and expenses that investors paid over 15 years to not even get a return your mother-in-law could’ve made, and you can see why Buffett continually praises Bogle.
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What You Should Be Doing
Before you go out and invest all your money in a Vanguard S&P index fund, I want to add a caveat to Buffett’s advice.
If you know nothing about investing or don't have the time to research investments, then you couldn’t find an easier investment plan than buying an S&P index fund.
However, if you are willing to put in a little time each week, avoid silly lottery ticket investments, and invest with an approach that has withstood the test of time, then even Buffett would agree: you CAN do better than benchmark index returns.
Since I started Insider Alert, our returns have been crushing it.
We don't have a crystal ball to see the future. Instead, we have stuck to an approach that continues to make money for us in both bull and bear markets.
Our approach is simple, doesn’t take more than 10 minutes a week on your part, and is spelled out in easy-to-understand updates.
All my best,
Charles cut his chops on the trading floor of the New York Futures Exchange before moving on to become a wildly successful money manager on Wall Street.
And with more than 35 years of recommending stocks under his belt, Charles has knocked the cover off the ball, compiling an amazing record of success and posting gain after gain for his loyal readers. He is the editor of Park Avenue Investment Club and the Insider Alert newsletters.
Charles is also the author of the highly acclaimed book, Getting Started in Value Investing.
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