Most investors would be happy with a track record like Warren Buffett’s. The billionaire, at the helm of Berkshire Hathaway, has helped generate a compounded annual gain of nearly 20% over the past 58 years. That’s compared with a compounded annual increase of about 10% for the S&P 500 over that time period. So, Buffett and his team’s stock picks have led to market-beating performance over the long haul.
To potentially score a win similar to Buffett’s, you could follow some of this expert investor’s moves, buying stocks he favors, for example. But to truly replicate this top investor’s performance, you might have to pick up shares of many different stocks, which could become expensive and hard to manage. You would also have to follow when Buffett decreases a position or cuts it entirely.
But there’s another way to invest like Buffett in 2025 and beyond — and the good news is it’s low cost and easy. Along with a variety of top stocks like Apple and Coca-Cola, there’s another investment Buffett includes in his portfolio. He’s even recommended this one as a great buy for nonprofessional investors. Let’s take a closer look at this Buffett-approved investment to add to your portfolio now and potentially score a win from later.
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Betting on American companies
Before introducing this asset, though, it’s important to explain how it reflects one key part of Buffett’s strategy: betting on solid American companies. “American business has done wonderfully over time and will continue to do so,” Buffett wrote in his 2013 letter to shareholders.
A look at Buffett’s portfolio over time supports this idea, with this top investor piling into companies that drive the U.S. economy. Today, Apple, American Express, Bank of America, and Coca-Cola — four American powerhouses — are the billionaire’s biggest holdings. American Express and Coca-Cola were also in the top four a decade ago, along with other American giants of the time.
Let’s consider the asset you should buy now to follow in Buffett’s footsteps. As mentioned, Buffett includes this one in his own portfolio to complement the stocks he’s handpicked. I’m talking about an S&P 500 index fund. Buffett owns shares of the SPDR S&P 500 ETF Trust (SPY 1.20%) and the Vanguard S&P 500 ETF (VOO 1.13%). Both of these exchange-traded funds (ETFs) mimic the composition of the S&P 500 and, therefore, deliver the same performance as the index.
A strategy that’s proven its strength
Why would you want your performance to track that of the S&P 500? Because over time, the benchmark has proven the strength of these companies that drive the economy, delivering an annualized average gain of about 10% since its launch as a 500-member index back in the late 1950s. History doesn’t always repeat itself, but considering this track record and the quality of S&P 500 companies overall, there’s reason to be optimistic about the index’s ability to deliver growth over time.
Buffett not only holds the S&P 500 index funds in his portfolio but also requested that trustees put 90% of his cash into an S&P 500 index fund for his wife upon his death. So, this top investor clearly champions betting on the S&P 500 index over time.
So, how do you invest in these ETFs? Exactly as you would invest in a stock. They trade daily on the market, making it easy for you to buy or sell. The one key difference separating them from stocks is their expense ratios. However, if you go for an ETF with a ratio of less than 1%, this won’t weigh much on your returns. The SPDR and Vanguard funds fit the bill, with expense ratios of 0.09% and 0.03%, respectively.
After you’ve added one of these funds to your portfolio, it’s important to consider one other bit of advice from the Oracle of Omaha, as Buffett is often called. And that’s to hold on for the long term, offering this top investment time to reflect the growth of its companies and advance — and potentially grow wealth for you over time.
Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Adria Cimino has positions in American Express. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
