You might think Warren Buffett is among the top stock pickers in the world. Berkshire Hathaway has a long history that really shows this. In fact, you could even consider adopting some of Buffett’s stock choices for your investments.
However, it’s interesting to note that the Oracle of Omaha actually prefers a different approach for most people. He suggests keeping it simple—a buy-and-hold strategy, notably starting out with a single exchange-traded fund (ETF) that reflects the performance of mutual funds, like the S&P 500 (SNPINDEX: ^GSPC).
Data backs Buffett’s recommendation
Buffett recently reiterated this point during Berkshire Hathaway’s 2020 annual meeting, stating that owning an S&P 500 index fund, such as the SPDR S&P 500 ETF Trust (NYSEMKT: Spy) or the Vanguard S&P 500 ETF (NYSEMKT: VOO), is the best move for the average investor. He has consistently highlighted the advantages of this straightforward, passive investment strategy since his 1993 letter to shareholders. Remarkably, even someone who isn’t very knowledgeable about investing can often outperform many investment professionals.
The statistics certainly support Buffett’s stance. A report by Standard & Poor’s on mutual funds accessible to U.S. investors found that last year, 79% of large-cap funds fell short of the S&P 500 benchmark. This was not merely a fluke; over the last five years, 89% of these funds lagged behind, and astonishingly, nearly 90% of large-cap funds didn’t measure up over the past 15 years. Moreover, those few funds that did outperform the market in one period typically didn’t do so in another.
In many situations, outperforming the S&P 500 is more about luck than skill. Interestingly, hedge funds and actively managed ETFs face similar challenges when compared to major benchmarks.
Consider the odds
So, can a small investor achieve what the so-called experts can’t? It’s certainly possible. As a typical individual investor, you’re not required to disclose your trades beforehand, nor do you have to fret about market fluctuations related to your buying or selling actions. This scenario presents benefits that most funds simply don’t have.
However, the chances of consistently leveraging this advantage to outshine the overall market are quite slim. If your aim is to maximize potential profits while minimizing risk, following Buffett’s advice—such as holding onto something like the SPDR S&P 500 ETF Trust or the Vanguard S&P 500 ETF—may be your best strategy, at least as a foundational element of your investment portfolio.
Should you invest in Vanguard S&P 500 ETF now?
Before deciding whether to buy shares of the Vanguard S&P 500 ETF, it’s worth considering some aspects.
Our analyst team at Motley Fool Stock Advisor has pinpointed what they regard as some top stocks that investors might consider right now, and notably, the Vanguard S&P 500 ETF isn’t on that list. These ten highlighted stocks show promise for strong returns in the coming years.
It’s essential to remember that the average return from Stock Advisor totals around 971%, significantly eclipsing the S&P 500’s 202% return. This kind of market-beating performance can’t be overlooked.
*Stock Advisor will update on May 2, 2026.
