Warren Buffett doesn't usually recommend his investments outright to others. He often praises some of his favorite stocks, like Coca-Cola and Apple, and he gives general investing advice, like avoiding overvalued stocks and looking at businesses rather than stock prices.
However, he has recommended investing in an S&P 500 index fund many times, and over the past 10 years, doing so would have quadrupled your money.
The easy way to grow your money
In 2013, Buffett described how he and Charlie Munger, his longtime business partner, spent their days analyzing businesses. However, he believes that the retail investor doesn't need to do that and can rely on the growth of the U.S. economy. "The goal of the non-professional should not be to pick winners...but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal." He went on to recommend the Vanguard S&P 500 ETF (VOO -0.60%).
Warren Buffett. Image source: The Motley Fool.
There's a lot packed into his statement. An S&P 500 exchange-traded fund provides an instant, diversified portfolio of stocks that are expected to grow over time. The Vanguard ETF, in particular, has a low expense ratio of only 0.03%, so you keep more of your gains.
Buffett made this recommendation more than 10 years ago, and over the last decade, the S&P 500, along with the index funds that track it, has gained more than 300%. If you had invested $10,000 in 2016, you'd have more than $40,000 today.
Over time, that trend is likely to continue.
