If you're looking to put money to work for the long run, an index fund can allow you to spread your money out across a portfolio of stocks and at a bare minimum of expense. But there are some stocks that offer this sort of "all-in-one" investment approach, as well.

One great example is Berkshire Hathaway (BRK.A -1.63%) (BRK.B -1.66%). This conglomerate, which is led by billionaire investor Warren Buffett, owns a collection of more than 60 subsidiary businesses, including household names like GEICO, Duracell, and Dairy Queen, as well as a massive portfolio of common stocks with a market value of well over $200 billion. I've said before that if I was only allowed to own one stock, Berkshire Hathaway would be it.

With that in mind, is Berkshire Hathaway a better investment than simply buying an S&P 500 index fund like the Vanguard S&P 500 ETF (VOO -0.67%)? Unfortunately, there's not a perfect answer to this question, as there are pros and cons to both choices.

Man with hands out as if weighing two options.

Image source: Getty Images.

Reasons to buy Berkshire Hathaway

The biggest difference is that buying Berkshire Hathaway (or any other stock for that matter) is generally done as an attempt to beat the market. On the other hand, buying an S&P 500 index fund is designed to match the market's returns -- no more, no less.

To say that Berkshire has beaten the market over the years would be a massive understatement. The company has more than doubled the annualized return of the S&P 500 since Warren Buffett took the helm in 1964 and has produced a total return of more than 2,000,000% (that's not a typo) for investors since.

Berkshire won't repeat this level of performance over the net 56 years. It can't -- it's just getting too big for gains like that to be sustainable. Even Warren Buffett told investors to temper their expectations going forward. However, Berkshire uses a time-tested business model that uses cash from its operating businesses to reinvest in timely opportunities, so it certainly has the potential for market-beating returns.

Reasons to buy an S&P 500 index fund

By definition, investing in the S&P 500 will match the market's returns over time. Before you shrug this off as inadequate, it's important to know that the S&P 500 has produced some pretty impressive returns over time, averaging 9%-10% annualized total returns over multidecades. A $10,000 investment in the S&P 500 made 30 years ago with dividends reinvested would have grown to more than $190,000 today. So even "matching" the market has some serious wealth-creation potential.

What's more, investing in an S&P 500 index fund will put your investing on auto pilot in ways that even a rock-solid company like Berkshire Hathaway can't. You won't have to read earnings reports and shareholder letters, and you won't have to monitor how the company is doing over time. You can simply hit the buy button and let the stock market do the rest. In fact, Warren Buffett himself has called a low-cost S&P 500 index fund the best investment most Americans can make, and the passive and high-return nature of it are the main reasons why.

As a final point, it's worth noting that if you're going to be relying on your investments for income, the S&P 500 index fund is the logical choice. Berkshire Hathaway doesn't pay a dividend, while the S&P 500 yields nearly 2%, as of November 2020.

The Foolish bottom line: Which is best for you?

Here's the key takeaway: Over the long run, you won't go wrong with either of these companies. Berkshire Hathaway is best suited to investors who want to play at least a little bit of an active role in their investments and whose goal it is to beat the market over time. The S&P 500 index fund is best for investors who truly want to put their money on auto-pilot and let the long-term compounding power of the stock market do the heavy lifting for them.