Warren Buffet Recommends S & P 500?

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alex123711
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Warren Buffet Recommends S & P 500?

Post by alex123711 » Sun Jun 28, 2020 5:17 am

I have seen Buffet recommend the S & P 500 to a few times e.g:

https://www.youtube.com/watch?v=-GrKhUdu-YE

I haven't really seen him mention adding international/ all world index, I assume he thinks the S & P 500 covers enough of the world and enough multinational companies/ exposure and the other reasons commonly mentioned in the international threads? Is it good enough to follow his advice?

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Re: Warren Buffet Recommends S & P 500?

Post by Ferdinand2014 » Sun Jun 28, 2020 5:47 am

I follow his advice and have been very happy. I personally believe it is plenty good enough. I keep enough cash to sleep well and the rest goes into a low cost S&P 500 index fund. Your savings rate and ability to stay the course will outweigh any decision regarding your allocation choices to stock domicile or sector. Your most important allocation decision for diversification will be your fixed income to stock allocation by far. Most on this forum would disagree with his advice. I encourage you to read and learn all you can and make up your own mind. It is important to have a conviction of your choice in order to stay the course over the years. Without that, no decision you make will work.
Last edited by Ferdinand2014 on Sun Jun 28, 2020 5:54 am, edited 1 time in total.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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Re: Warren Buffet Recommends S & P 500?

Post by 22twain » Sun Jun 28, 2020 5:53 am

This has been discussed here many times.

https://www.google.com/search?sitesearc ... t+s%26p500

IMHO a major factor is the "name recognition" of the S&P 500. Buffet knows that "average folks" are likely to recognize it because they see it on the news all the time next to the DJIA.
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Re: Warren Buffet Recommends S & P 500?

Post by LiveSimple » Sun Jun 28, 2020 5:58 am

The answer you will get will be yes it will suit you and no it will not suit you.

Reason for yes, you will be 90% to 100% equities and this is one flavor of the portfolio, which is much better than other portfolios.
You may improve this with replacing SP 500 with Total Stock Market Index.


Reason for No, this works only if your family name is "Buffet" and you have $$$ in billions, even if the equities are down to 90%, you will have $$$ millions to live on.

So you have to sit down, read some good books and understand the three fund portfolio and decide for yourself what to do. The portfolio can skew a lot within the three fund portfolio, towards the Buffet Portfolio, for example :
Total Stock Market Index : 80%, International 10% and Fixed income 10%
Total Stock Market Index : 60%, International 20% and Fixed income 20%

Then you can follow the no international portfolio or even Bogle Portfolio (?)
Total Stock Market Index : 60%, Fixed income 40%

Then you can design to be slice and dicer portfolio

Then you can design a tilted portfolio.


In the end you decide what you prefer and that may have been discussed here....you will be fine...

Our portfolio is "our own" and works well for us, it does not follow any portfolio, followed here. so you learn from here and design the portfolio that suits you / your family needs... good luck, earning , saving and investing sensibly is important than assets selection.

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Re: Warren Buffet Recommends S & P 500?

Post by RJC » Sun Jun 28, 2020 6:36 am

The S&P500 and a percentage of fixed income is all that you need. Simple and efficient.

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Re: Warren Buffet Recommends S & P 500?

Post by happyisland » Sun Jun 28, 2020 6:57 am

I personally do not follow his advice (I "buy the haystack" by owning a non-tilted market portfolio), but I definitely think that it is "good enough to follow his advice." Maybe up the bond portion to make sure you can sleep well at night. :sharebeer

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Re: Warren Buffet Recommends S & P 500?

Post by JoMoney » Sun Jun 28, 2020 8:16 am

Our mentor, John Bogle, also recommended a low-cost S&P 500 fund coupled with enough bonds to suit your risk tolerance.
After the creation of the 'Total Market' index fund was created Mr. Bogle switched to that as his primary recommended equity holding (but pointed out that there's no reason to switch from an S&P 500 fund as they are essentially the same thing). Personally, I prefer the S&P 500 index methodology and use that.
Mr. Bogle also didn't think an international allocation was necessary for a U.S. investor, nor that the various slice-n-dice "tilts" people add would add any benefit, but they do add complexity and costs to the portfolio.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Warren Buffet Recommends S & P 500?

Post by whereskyle » Sun Jun 28, 2020 8:46 am

alex123711 wrote:
Sun Jun 28, 2020 5:17 am
I have seen Buffet recommend the S & P 500 to a few times e.g:

https://www.youtube.com/watch?v=-GrKhUdu-YE

I haven't really seen him mention adding international/ all world index, I assume he thinks the S & P 500 covers enough of the world and enough multinational companies/ exposure and the other reasons commonly mentioned in the international threads? Is it good enough to follow his advice?
An S&P 500 index fund is certainly good enough. Because the horizon for my investments is over 30 years, I also own an all-world index fund. Even though I own a US total market fund and an all-world fund and I do not own an SP 500 index fund per se, the SP 500 makes up more than half of my portfolio. What's the saying? Put your money where your mouth is? Most of my money is on the SP 500.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

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Re: Warren Buffet Recommends S & P 500?

Post by dbr » Sun Jun 28, 2020 8:52 am

I would certainly not ever make an investment decision or choice based on something Warren Buffett has said, or in a lot of cases based on various things Mr. Bogle has said.

Notwithstanding, I would not warn someone that they are making a big mistake to hold all their equities in an S&P 500 index fund. But, I would advise a person in general to have some allocation to international stocks. You will not get a number out of me, though.

Disclaimer: I do hold an allocation to international stocks.

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Re: Warren Buffet Recommends S & P 500?

Post by Robot Monster » Sun Jun 28, 2020 8:53 am

alex123711 wrote:
Sun Jun 28, 2020 5:17 am
Is it good enough to follow his advice?
Is it good enough to follow the advice of one of the most successful investors in the world? By most definitions of "good enough" seems obviously the answer is yes?

"The Oracle of Omaha even said he’s instructed the trustee in charge of his estate to invest 90 percent of his money into the S&P 500 for his wife after he dies."
https://www.cnbc.com/2019/02/26/warren- ... funds.html

If it's good enough for Warren Buffet's wife, I dare say it's good enough for us!

So there!

Not to imply I follow his advice. N. Gregory Mankiw, a professor of economics at Harvard, wrote in a NYT article, "...Most economists take a more global perspective. The United States represents a bit under half of the world’s stock portfolio. Because Europe, Japan and the emerging markets don’t move in lock step with the United States, it makes sense to invest abroad as well." I dare say it's good enough to follow this advice, as well!

Are you gonna go with the Lamborghini or the Ferrari? The vanilla or the chocolate? I'd say either would be good enough.

Then again, why do you want my advice, anyway? I'm just a random person on the internet. Silly rabbit!

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Re: Warren Buffet Recommends S & P 500?

Post by tibbitts » Sun Jun 28, 2020 8:59 am

alex123711 wrote:
Sun Jun 28, 2020 5:17 am
I have seen Buffet recommend the S & P 500 to a few times e.g:

https://www.youtube.com/watch?v=-GrKhUdu-YE

I haven't really seen him mention adding international/ all world index, I assume he thinks the S & P 500 covers enough of the world and enough multinational companies/ exposure and the other reasons commonly mentioned in the international threads? Is it good enough to follow his advice?
Keeping all your money in a bank account may be good enough too; that doesn't mean it might be a good path for you.

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Re: Warren Buffet Recommends S & P 500?

Post by bck63 » Sun Jun 28, 2020 9:10 am

RJC wrote:
Sun Jun 28, 2020 6:36 am
The S&P500 and a percentage of fixed income is all that you need. Simple and efficient.
^This. It's the S&P for me.

I can't follow Buffett's 90/10 advice (that would be foolish for me as a modest investor; I don't have the ability to take that much risk). And I do own the total bond market in addition to short-term treasuries. But the statement above captures it perfectly. It's the best investing advice there is, IMHO. It's also CHEAP. No big ERs or management fees.

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Re: Warren Buffet Recommends S & P 500?

Post by dbr » Sun Jun 28, 2020 9:34 am

bck63 wrote:
Sun Jun 28, 2020 9:10 am
RJC wrote:
Sun Jun 28, 2020 6:36 am
The S&P500 and a percentage of fixed income is all that you need. Simple and efficient.
^This. It's the S&P for me.

I can't follow Buffett's 90/10 advice (that would be foolish for me as a modest investor; I don't have the ability to take that much risk). And I do own the total bond market in addition to short-term treasuries. But the statement above captures it perfectly. It's the best investing advice there is, IMHO. It's also CHEAP. No big ERs or management fees.
Exactly. All of the conversation about international demonstrates that the issue is not a critical one.

All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.

Hitting correct on 50% is a miserable fail for looking at Buffett for advice. Also you only know that by spending significant time and attention on the subject -- also a miserable fail for investing by simplistic sound bytes from well known people.

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Re: Warren Buffet Recommends S & P 500?

Post by 1789 » Sun Jun 28, 2020 10:14 am

SP500 and some fixed income would work, imo. His percentages doesn’t make any sense, because 10% CASH in his case is a lot of monies.
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Re: Warren Buffet Recommends S & P 500?

Post by bck63 » Sun Jun 28, 2020 10:19 am

dbr wrote:
Sun Jun 28, 2020 9:34 am
All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.
Absolutely. I like to think of myself as an investor (I've learned so much here thanks to all you bogleheads), but in reality I'm primarily a saver and I never want to forget that. If I'm granted the grace to make it to retirement, my wife and I will have a modest but sufficient nest egg for us to enjoy our later years. So if my AA were 90/10 and I saw 40% or 50% or more of my savings wiped I'd out be devastated. I'd also almost certainly do something stupid, which would likely ruin my retirement years. Rule #1 for me is Know Thyself.

I've always thought Buffett should add a caveat when he says such things (like the 90/10 thing) publicly.

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Re: Warren Buffet Recommends S & P 500?

Post by Ferdinand2014 » Sun Jun 28, 2020 11:08 am

bck63 wrote:
Sun Jun 28, 2020 10:19 am
dbr wrote:
Sun Jun 28, 2020 9:34 am
All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.
Absolutely. I like to think of myself as an investor (I've learned so much here thanks to all you bogleheads), but in reality I'm primarily a saver and I never want to forget that. If I'm granted the grace to make it to retirement, my wife and I will have a modest but sufficient nest egg for us to enjoy our later years. So if my AA were 90/10 and I saw 40% or 50% or more of my savings wiped I'd out be devastated. I'd also almost certainly do something stupid, which would likely ruin my retirement years. Rule #1 for me is Know Thyself.

I've always thought Buffett should add a caveat when he says such things (like the 90/10 thing) publicly.
He has clarified on a number of occasions that the amount of cash to hold should be enough to sleep well at night, some people simply do not have the emotional ability to own stocks (and shouldn't) and that sometimes bonds make sense, but not at current interest rates relative to PE of stocks. I personally look at the advice in the context of why he suggested it in the first place which was low cost, diversification and simplicity. This he references in the 'Bet' from 2007-2017 with VFIAX vs the hedge fund managers.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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Re: Warren Buffet Recommends S & P 500?

Post by dbr » Sun Jun 28, 2020 11:15 am

bck63 wrote:
Sun Jun 28, 2020 10:19 am
dbr wrote:
Sun Jun 28, 2020 9:34 am
All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.
Absolutely. I like to think of myself as an investor (I've learned so much here thanks to all you bogleheads), but in reality I'm primarily a saver and I never want to forget that. If I'm granted the grace to make it to retirement, my wife and I will have a modest but sufficient nest egg for us to enjoy our later years. So if my AA were 90/10 and I saw 40% or 50% or more of my savings wiped I'd out be devastated. I'd also almost certainly do something stupid, which would likely ruin my retirement years. Rule #1 for me is Know Thyself.

I've always thought Buffett should add a caveat when he says such things (like the 90/10 thing) publicly.
I believe that Mr. Buffett sincerely believes that 90% stock is a good recommendation for everyone. The reason for this is his abiding faith in the ongoing vitality of American capitalism and the wisdom of owning part of that enterprise against the low reward obtainable by lending people money.

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Re: Warren Buffet Recommends S & P 500?

Post by dbr » Sun Jun 28, 2020 11:19 am

Ferdinand2014 wrote:
Sun Jun 28, 2020 11:08 am
bck63 wrote:
Sun Jun 28, 2020 10:19 am
dbr wrote:
Sun Jun 28, 2020 9:34 am
All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.
Absolutely. I like to think of myself as an investor (I've learned so much here thanks to all you bogleheads), but in reality I'm primarily a saver and I never want to forget that. If I'm granted the grace to make it to retirement, my wife and I will have a modest but sufficient nest egg for us to enjoy our later years. So if my AA were 90/10 and I saw 40% or 50% or more of my savings wiped I'd out be devastated. I'd also almost certainly do something stupid, which would likely ruin my retirement years. Rule #1 for me is Know Thyself.

I've always thought Buffett should add a caveat when he says such things (like the 90/10 thing) publicly.
He has clarified on a number of occasions that the amount of cash to hold should be enough to sleep well at night, some people simply do not have the emotional ability to own stocks (and shouldn't) and that sometimes bonds make sense, but not at current interest rates relative to PE of stocks. I personally look at the advice in the context of why he suggested it in the first place which was low cost, diversification and simplicity. This he references in the 'Bet' from 2007-2017 with VFIAX vs the hedge fund managers.
I think the recommendation is to develop the psyche to hold 90% stocks though for a time it might be necessary to accumulate some money so that 10% is enough to sleep well. Remember that bonds are a terrible investment. When 10% is also ten million dollars that is easy. Then again when 10% is ten thousand dollars there may not be enough money to worry about. In between I doubt I would recommend a 90/10 allocation to anyone or take that allocation myself.

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Re: Warren Buffet Recommends S & P 500?

Post by bck63 » Sun Jun 28, 2020 11:26 am

dbr wrote:
Sun Jun 28, 2020 11:15 am
bck63 wrote:
Sun Jun 28, 2020 10:19 am
dbr wrote:
Sun Jun 28, 2020 9:34 am
All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.
Absolutely. I like to think of myself as an investor (I've learned so much here thanks to all you bogleheads), but in reality I'm primarily a saver and I never want to forget that. If I'm granted the grace to make it to retirement, my wife and I will have a modest but sufficient nest egg for us to enjoy our later years. So if my AA were 90/10 and I saw 40% or 50% or more of my savings wiped I'd out be devastated. I'd also almost certainly do something stupid, which would likely ruin my retirement years. Rule #1 for me is Know Thyself.

I've always thought Buffett should add a caveat when he says such things (like the 90/10 thing) publicly.
I believe that Mr. Buffett sincerely believes that 90% stock is a good recommendation for everyone. The reason for this is his abiding faith in the ongoing vitality of American capitalism and the wisdom of owning part of that enterprise against the low reward obtainable by lending people money.
I currently have 10 years of expenses in fixed income (not including expected Social Security), with 6-8 years to go until retirement. My allocation is 35/65. Maybe I should consider dialing it back up a bit.

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Re: Warren Buffet Recommends S & P 500?

Post by FrankTheViking » Sun Jun 28, 2020 11:41 am

I tried it but couldn't sleep well. Added 20% INTL and I'm a happy camper. I do believe being 100% U.S. will likely outperform over my lifetime, but personally I could not do it.
No EF. 80% Total U.S. / 20% Total International. 100% equity. Is there a gun to your head? Is there a tiger in the room? No? What's the problem?

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Re: Warren Buffet Recommends S & P 500?

Post by gmaynardkrebs » Sun Jun 28, 2020 1:04 pm

alex123711 wrote:
Sun Jun 28, 2020 5:17 am
I have seen Buffet recommend the S & P 500 to a few times e.g:
He doesn't follow his own advice.

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Re: Warren Buffet Recommends S & P 500?

Post by dbr » Sun Jun 28, 2020 1:09 pm

bck63 wrote:
Sun Jun 28, 2020 11:26 am
dbr wrote:
Sun Jun 28, 2020 11:15 am
bck63 wrote:
Sun Jun 28, 2020 10:19 am
dbr wrote:
Sun Jun 28, 2020 9:34 am
All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.
Absolutely. I like to think of myself as an investor (I've learned so much here thanks to all you bogleheads), but in reality I'm primarily a saver and I never want to forget that. If I'm granted the grace to make it to retirement, my wife and I will have a modest but sufficient nest egg for us to enjoy our later years. So if my AA were 90/10 and I saw 40% or 50% or more of my savings wiped I'd out be devastated. I'd also almost certainly do something stupid, which would likely ruin my retirement years. Rule #1 for me is Know Thyself.

I've always thought Buffett should add a caveat when he says such things (like the 90/10 thing) publicly.
I believe that Mr. Buffett sincerely believes that 90% stock is a good recommendation for everyone. The reason for this is his abiding faith in the ongoing vitality of American capitalism and the wisdom of owning part of that enterprise against the low reward obtainable by lending people money.
I currently have 10 years of expenses in fixed income (not including expected Social Security), with 6-8 years to go until retirement. My allocation is 35/65. Maybe I should consider dialing it back up a bit.
Certainly not because you are reading a discussion about what Buffett says or what someone on this forum says Buffett says.

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Re: Warren Buffet Recommends S & P 500?

Post by BalancedJCB19 » Sun Jun 28, 2020 1:43 pm

Ferdinand2014 wrote:
Sun Jun 28, 2020 5:47 am
I follow his advice and have been very happy. I personally believe it is plenty good enough. I keep enough cash to sleep well and the rest goes into a low cost S&P 500 index fund. Your savings rate and ability to stay the course will outweigh any decision regarding your allocation choices to stock domicile or sector. Your most important allocation decision for diversification will be your fixed income to stock allocation by far. Most on this forum would disagree with his advice. I encourage you to read and learn all you can and make up your own mind. It is important to have a conviction of your choice in order to stay the course over the years. Without that, no decision you make will work.
+1
Spot on advice!!

The main thing as mentioned above is the ability to stick with your plan and asset allocation through thick and thin. The money Warren is leaving to his wife would be 10% in treasuries and 90% in the S&P. No one knows the amount he is leaving her. When asked how much his kids will receive he stated enough to do whatever they want, but not enough to do nothing, so that is open to a lot of interpretation and you will just be guessing the amount he is leaving his wife Astrid who is 74 years old.

For what it's worth, my plan that enables me to stay the course no matter what is happening is Jack Bogle's advice about the Balanced Index Fund. The money he gave to his Grandchildren has been put in this fund because he doesn't want to worry about it or think about it and he doesn't want them to worry about it either. He was asked by the Motley Fool the following question: Assuming someone wants to invest all their money in index funds, how many funds do they need. He said you could certainly do it with one and that would be the balanced index fund. He also stated, a person could stay with this fund for life if it fits their risk tolerance and they want to look at social security as part of their bond allocation.

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Re: Warren Buffet Recommends S & P 500?

Post by bck63 » Sun Jun 28, 2020 1:57 pm

dbr wrote:
Sun Jun 28, 2020 1:09 pm
bck63 wrote:
Sun Jun 28, 2020 11:26 am
dbr wrote:
Sun Jun 28, 2020 11:15 am
bck63 wrote:
Sun Jun 28, 2020 10:19 am
dbr wrote:
Sun Jun 28, 2020 9:34 am
All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.
Absolutely. I like to think of myself as an investor (I've learned so much here thanks to all you bogleheads), but in reality I'm primarily a saver and I never want to forget that. If I'm granted the grace to make it to retirement, my wife and I will have a modest but sufficient nest egg for us to enjoy our later years. So if my AA were 90/10 and I saw 40% or 50% or more of my savings wiped I'd out be devastated. I'd also almost certainly do something stupid, which would likely ruin my retirement years. Rule #1 for me is Know Thyself.

I've always thought Buffett should add a caveat when he says such things (like the 90/10 thing) publicly.
I believe that Mr. Buffett sincerely believes that 90% stock is a good recommendation for everyone. The reason for this is his abiding faith in the ongoing vitality of American capitalism and the wisdom of owning part of that enterprise against the low reward obtainable by lending people money.
I currently have 10 years of expenses in fixed income (not including expected Social Security), with 6-8 years to go until retirement. My allocation is 35/65. Maybe I should consider dialing it back up a bit.
Certainly not because you are reading a discussion about what Buffett says or what someone on this forum says Buffett says.
I know. Just thinking aloud. Tempermentally, I'm better off with a conservative allocation.

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Re: Warren Buffet Recommends S & P 500?

Post by Sage16 » Sun Jun 28, 2020 2:08 pm

So Warren Buffett's net worth is currently in the ballpark of $70 Billion. He has said that 99% of his wealth is in Berkshire stock and all of that will go to charity. So the remaining 1%, a mere $700 Million will go to his wife. If we ignore that he has said he owns some farm land and part of a commercial building in NY, a 90/10 portfolio of $700 million would be $630 million in the S&P 500 and $70 million in treasuries. His wife has been reported to be just as thrifty as Warren so a 90/10 portfolio for her with a $70 million cushion in treasuries, she can probably handle the ups and downs of the market much better than many of us that have a more modest portfolio. She would also be collecting around $12 Million a year in dividends from the S&P fund.
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Re: Warren Buffet Recommends S & P 500?

Post by nisiprius » Sun Jun 28, 2020 3:02 pm

It is an observed fact that, yes, he has often recommended "a low-cost S&P 500 index fund" for ordinary investors. For example, in his 2016 shareholder letter, on p. 24, he said:
Over the years, I’ve often been asked for investment advice, and in the process of answering I’ve learned a good deal about human behavior. My regular recommendation has been a low-cost S&P 500 index fund. To their credit, my friends who possess only modest means have usually followed my suggestion.
Sometimes he has mentioned Vanguard by name. It was also a Vanguard S&P 500 index fund that Buffett used in his famous long bet (the text of the long bet just talks about the index, but the shareholder letter I quoted above says it was a Vanguard S&P 500 index fund):
Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.
Some salient characteristics of the S&P 500 is that it is US-only; that it does not include small-caps; and that it does not have a value tilt.

He has never explained his reasons. Warren Buffett fans feel sure that they understand him, and can deduce his reasons from their reading of the Berkshire Hathaway annual report. Certainly, I, too, can read what he said about "human behavior" and "friends... have usually followed my suggestion." That could mean "I recommend this because anything more complicated won't get followed." But it's just guessing. As far as I know he has never explained it. Period. End of story.

We don't know if he is making a specific recommendation to invest only in the US. We don't know if he is making a specific recommendation to stick to large-caps. We do not know if he just means "keep it simple, the S&P 500 is good enough, the other stuff doesn't matter, the more complicated you make the advice the less likely people are follow it."

We. Do. Not. Know.

I once wrote a letter to him at his office in Omaha and asked him, but he did not answer.
Last edited by nisiprius on Sun Jun 28, 2020 3:17 pm, edited 2 times in total.
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Re: Warren Buffet Recommends S & P 500?

Post by lws » Sun Jun 28, 2020 3:15 pm

The S&P500 plus fixed income can serve you well.

x % S&P500
y % fixed income
x and y varies according to your preference

There are other good alternatives.

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Re: Warren Buffet Recommends S & P 500?

Post by gmaynardkrebs » Sun Jun 28, 2020 3:35 pm

nisiprius wrote:
Sun Jun 28, 2020 3:02 pm
It is an observed fact that, yes, he has often recommended "a low-cost S&P 500 index fund" for ordinary investors. For example, in his 2016 shareholder letter, on p. 24, he said:
Over the years, I’ve often been asked for investment advice, and in the process of answering I’ve learned a good deal about human behavior. My regular recommendation has been a low-cost S&P 500 index fund. To their credit, my friends who possess only modest means have usually followed my suggestion.
Sometimes he has mentioned Vanguard by name. It was also a Vanguard S&P 500 index fund that Buffett used in his famous long bet (the text of the long bet just talks about the index, but the shareholder letter I quoted above says it was a Vanguard S&P 500 index fund):
Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.
Some salient characteristics of the S&P 500 is that it is US-only; that it does not include small-caps; and that it does not have a value tilt.

He has never explained his reasons. Warren Buffett fans feel sure that they understand him, and can deduce his reasons from their reading of the Berkshire Hathaway annual report. Certainly, I, too, can read what he said about "human behavior" and "friends... have usually followed my suggestion." That could mean "I recommend this because anything more complicated won't get followed." But it's just guessing. As far as I know he has never explained it. Period. End of story.

We don't know if he is making a specific recommendation to invest only in the US. We don't know if he is making a specific recommendation to stick to large-caps. We do not know if he just means "keep it simple, the S&P 500 is good enough, the other stuff doesn't matter, the more complicated you make the advice the less likely people are follow it."

We. Do. Not. Know.

I once wrote a letter to him at his office in Omaha and asked him, but he did not answer.
I think you are being too kind. His explanation is basically, you can't go wrong betting on America. Ok, rah, rah. What little else he has said makes even less sense (these companies make a lot of money!!!).

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Re: Warren Buffet Recommends S & P 500?

Post by oldzey » Sun Jun 28, 2020 5:00 pm

I think the main reason Mr. Buffett recommends a "S&P 500 index fund" over a "Total U.S. Stock Market Index Fund" is because the S&P 500 name (brand) is more recognizable. The brand recognition is effective in conveying his message.

I would also bet that Mr. Buffett knows that both funds perform similarly.
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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Re: Warren Buffet Recommends S & P 500?

Post by RJC » Mon Jun 29, 2020 7:46 am

dbr wrote:
Sun Jun 28, 2020 9:34 am
bck63 wrote:
Sun Jun 28, 2020 9:10 am
RJC wrote:
Sun Jun 28, 2020 6:36 am
The S&P500 and a percentage of fixed income is all that you need. Simple and efficient.
^This. It's the S&P for me.

I can't follow Buffett's 90/10 advice (that would be foolish for me as a modest investor; I don't have the ability to take that much risk). And I do own the total bond market in addition to short-term treasuries. But the statement above captures it perfectly. It's the best investing advice there is, IMHO. It's also CHEAP. No big ERs or management fees.
Exactly. All of the conversation about international demonstrates that the issue is not a critical one.

All the conversation about asset allocation and risk in stocks demonstrates that following the advice 90% in stocks would be terrible for many investors.

Hitting correct on 50% is a miserable fail for looking at Buffett for advice. Also you only know that by spending significant time and attention on the subject -- also a miserable fail for investing by simplistic sound bytes from well known people.
I can't think of a situation where international would be skyrocketing over the US in our lifetime. S&P500/TSM + bonds/large EF and forget it.

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Re: Warren Buffet Recommends S & P 500?

Post by abuss368 » Mon Jun 29, 2020 7:55 am

Ferdinand2014 wrote:
Sun Jun 28, 2020 5:47 am
I follow his advice and have been very happy. I personally believe it is plenty good enough. I keep enough cash to sleep well and the rest goes into a low cost S&P 500 index fund. Your savings rate and ability to stay the course will outweigh any decision regarding your allocation choices to stock domicile or sector. Your most important allocation decision for diversification will be your fixed income to stock allocation by far. Most on this forum would disagree with his advice. I encourage you to read and learn all you can and make up your own mind. It is important to have a conviction of your choice in order to stay the course over the years. Without that, no decision you make will work.
:beer Excellent advice. In our investment journey thus far I have come to understand much better that the savings & investing rate with mutual funds that one can stay the course with in all markets is key. Worrying about including or excluding certain funds and assets class (i.e. commodities, small cap, REIT, international, etc.) is a small concern.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: Warren Buffet Recommends S & P 500?

Post by gmaynardkrebs » Mon Jun 29, 2020 8:04 am

RJC wrote:
Mon Jun 29, 2020 7:46 am
I can't think of a situation where international would be skyrocketing over the US in our lifetime. S&P500/TSM + bonds/large EF and forget it.
USA has great companies, but there are equally great companies selling at lower valuations internationally.

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Re: Warren Buffet Recommends S & P 500?

Post by RJC » Mon Jun 29, 2020 8:20 am

gmaynardkrebs wrote:
Mon Jun 29, 2020 8:04 am
RJC wrote:
Mon Jun 29, 2020 7:46 am
I can't think of a situation where international would be skyrocketing over the US in our lifetime. S&P500/TSM + bonds/large EF and forget it.
USA has great companies, but there are equally great companies selling at lower valuations internationally.
That is true; however, US and international markets are so intertwined now that I can't think of an example where international would be much better off at any given point. And would a 20% of your equities allocation really capture that gain?

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Re: Warren Buffet Recommends S & P 500?

Post by Robot Monster » Mon Jun 29, 2020 8:55 am

RJC wrote:
Mon Jun 29, 2020 8:20 am
gmaynardkrebs wrote:
Mon Jun 29, 2020 8:04 am
RJC wrote:
Mon Jun 29, 2020 7:46 am
I can't think of a situation where international would be skyrocketing over the US in our lifetime. S&P500/TSM + bonds/large EF and forget it.
USA has great companies, but there are equally great companies selling at lower valuations internationally.
That is true; however, US and international markets are so intertwined now that I can't think of an example where international would be much better off at any given point. And would a 20% of your equities allocation really capture that gain?
Imagine if the U.S.'s performance swapped with the U.K.'s.

Consider the performance of three portfolios over the past ten years, investing $100K yields:
1) 100% S&P -- $333,994
2) 100% iShares MSCI United Kingdom ETF (EWU) -- $117,976
3) 80% EWU, 20% S&P -- $147,106

Portfolio #3 beats #2 by $29,130, a not inconsiderable sum, but perhaps more than a %20 allocation does make sense. The Economist article "Should investors diversify away from America?" comes to this conclusion:

"A good investment rule, then, might be to allocate a third of an equity portfolio to American stocks, a third to an index of stocks listed in other rich countries and a third to emerging-market shares."
https://www.economist.com/finance-and-e ... om-america

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Re: Warren Buffet Recommends S & P 500?

Post by tibbitts » Mon Jun 29, 2020 9:24 am

RJC wrote:
Mon Jun 29, 2020 8:20 am
gmaynardkrebs wrote:
Mon Jun 29, 2020 8:04 am
RJC wrote:
Mon Jun 29, 2020 7:46 am
I can't think of a situation where international would be skyrocketing over the US in our lifetime. S&P500/TSM + bonds/large EF and forget it.
USA has great companies, but there are equally great companies selling at lower valuations internationally.
That is true; however, US and international markets are so intertwined now that I can't think of an example where international would be much better off at any given point. And would a 20% of your equities allocation really capture that gain?
The "markets being so intertwined" argument is that it makes it difficult to explain the relative performance of U.S. vs. ex-U.S.

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