Tuesday, February 25, 2014

Warren Buffet on Index Funds

Warren Buffet on Index Funds

Many investors think that Warren Buffet’s investment record at Berkshire Hathaway is proof that active managers can beat the stock market.  When it comes to Mr. Buffet’s estate, he begs to differ.  In his annual letter to Berkshire shareholders, Mr. Buffet tells readers:

My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire Hathaway (BRKA) shares will be fully distributed to certain philanthropic organizations over the 10 years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's. (VFINX)) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals -- who employ high-fee managers.[1]

I have nothing to add.  The full letter will be available on March 1.  I urge you to spend some time on Saturday reading it.

Investment Meeting (19995)

[1] http://finance.fortune.cnn.com/2014/02/24/warren-buffett-berkshire-letter/

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