{"id":10856,"date":"2022-09-15T19:00:37","date_gmt":"2022-09-16T00:00:37","guid":{"rendered":"http:\/\/blog.jlbn.net\/?p=10856"},"modified":"2022-09-15T19:00:38","modified_gmt":"2022-09-16T00:00:38","slug":"the-best-investment-according-to-warren-buffett-and-how-you-can-own-it","status":"publish","type":"post","link":"http:\/\/blog.jlbn.net\/?p=10856","title":{"rendered":"The Best Investment, According to Warren Buffett, and How You Can Own It"},"content":{"rendered":"\n<ul><li>Warren Buffett is one of the world&#8217;s most successful investors.<\/li><li>Buffett recommends a low-cost S&amp;P 500 index fund as the most sensible investment, most of the time.<\/li><li>A fund&#8217;s expense ratio quantifies what shareholders pay indirectly for fund costs.<\/li><\/ul>\n\n\n\n<h2>Sometimes, the simplest investing answer is the best one.<\/h2>\n\n\n\n<p>If there&#8217;s anyone qualified to define the best investment, it&#8217;s Warren Buffett. He&#8217;s the billionaire investor who runs&nbsp;<strong>Berkshire Hathaway<\/strong>&nbsp;<strong>(<a href=\"https:\/\/www.fool.com\/quote\/nyse\/brk.a\/\">BRK.A<\/a>&nbsp;-0.81%)<\/strong>&nbsp;<strong>(<a href=\"https:\/\/www.fool.com\/quote\/nyse\/brk.b\/\">BRK.B<\/a>&nbsp;-0.62%)<\/strong>, the $600 billion holding company that owns Geico auto insurance, See&#8217;s Candies, and many more.<\/p>\n\n\n\n<p>In a 2017 interview,&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/how-to-invest\/famous-investors\/warren-buffett-investments\/\">Buffett<\/a>&nbsp;had this recommendation for investors: &#8220;I think it&#8217;s the thing that makes the most sense practically all of the time. &#8230; [to] consistently buy an&nbsp;<strong>S&amp;P 500<\/strong>&nbsp;low-cost index fund.&#8221; Four years later, Buffett repeated his advice, saying, &#8220;I recommend the S&amp;P 500 index fund and have for a long, long time to people.&#8221;<\/p>\n\n\n\n<h2>Owning the S&amp;P 500<\/h2>\n\n\n\n<p>An S&amp;P 500 index fund owns all or most of the stocks in the benchmark S&amp;P 500 index. The index, by its own definition, represents &#8220;leading companies in leading industries.&#8221; These leading stocks must meet strict requirements for market capitalization, liquidity, and profitability.<\/p>\n\n\n\n<p>You can buy all stocks in the index individually, but it&#8217;s far easier to own an S&amp;P 500 index fund, as Buffett recommends. There are many S&amp;P 500 index funds available, and from known fund families like Vanguard,&nbsp;<strong>Charles Schwab<\/strong>, Fidelity,&nbsp;<strong>State Street<\/strong>&#8216;s SPDRs, and&nbsp;<strong>BlackRock&#8217;s<\/strong>&nbsp;iShares.<\/p>\n\n\n\n<h2>The low-cost index fund<\/h2>\n\n\n\n<p>Sticking with Buffett&#8217;s advice, your best option is a low-cost fund &#8212; or a fund with a low expense ratio. The expense ratio is the percentage of your investment that covers the fund&#8217;s operating costs.<\/p>\n\n\n\n<p><strong>Vanguard S&amp;P 500 ETF<\/strong>\u00a0<strong>(<a href=\"https:\/\/www.fool.com\/quote\/nysemkt\/voo\/\">VOO<\/a>\u00a0-1.12%)<\/strong>, for example, has an expense ratio of 0.03%. This means you pay $3 annually for every $10,000 you have invested. To be clear, you don&#8217;t pay this amount directly &#8212; there&#8217;s no line item on your statement. Those costs are embedded in the fund&#8217;s returns.<\/p>\n\n\n\n<p>A few bucks a year may not seem like much, but fund expenses cut into your bottom line over time.<\/p>\n\n\n\n<p>Say you want to invest $10,000 annually in an index fund for 20 years. Choose the Vanguard fund that charges 0.03% for expenses, and the projected future value of your investment is $405,506. That assumes a market-average growth rate of 7% per year after inflation.<\/p>\n\n\n\n<p>Alternatively, you could invest the same amount in the\u00a0<strong>Rydex S&amp;P 500 Fund<\/strong>, which has a much higher expense ratio of 2.31%. Your projected balance after 20 years is $320,030 &#8212; some $85,000 less. Shocking, right?<\/p>\n\n\n\n<h2>The importance of consistency<\/h2>\n\n\n\n<p>In addition to the &#8220;low-cost&#8221; tip, there&#8217;s another critical element of Buffett&#8217;s advice to follow: Invest consistently. He means that literally. Invest what you can each month without fail, regardless of what&#8217;s happening in the market.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.fool.com\/investing\/2022\/08\/16\/looking-at-stock-prices-daily-is-stressful\/\">Consistent investing is easier<\/a>&nbsp;and can be more profitable than timing your trades. It&#8217;s easier because you make fewer decisions, and you don&#8217;t have to worry about what the market will do tomorrow or next week. And it helps your gain potential by producing (on average) a lower cost basis, compared to trading only when the market&#8217;s strong.<\/p>\n\n\n\n<h2>Simple investing, the Buffett way<\/h2>\n\n\n\n<p>A recurring investment in a low-fee S&amp;P 500 index fund is a simple solution to the complex problem of wealth-building. It almost seems too easy. But history shows that consistent investing in leading U.S. stocks produces returns averaging about 7% annually, after inflation.<\/p>\n\n\n\n<p>At that rate of return, you&#8217;ll double your money about every 10 years. That sounds pretty promising, right?<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Warren Buffett is one of the world&#8217;s most successful investors. Buffett recommends a low-cost S&amp;P 500 index fund as the<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[254,3421,3422],"tags":[3471,3452,3435,888,3425,3561,3671,3728],"_links":{"self":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10856"}],"collection":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10856"}],"version-history":[{"count":1,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10856\/revisions"}],"predecessor-version":[{"id":10857,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10856\/revisions\/10857"}],"wp:attachment":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10856"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10856"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10856"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}