Warren Buffett has spent decades building one of the most complex investment portfolios in the world. Berkshire Hathaway (BRK.B) owns railroads, insurance companies, fast-food chains and consumer brands. Its operating earnings topped $44.5 billion in fiscal year 2025.
His advice to ordinary investors looks nothing like that portfolio. Buffett has repeated the same recommendation for years, and it does not involve picking stocks, timing markets or hiring expensive money managers.
In his 2013 letter to Berkshire shareholders, Buffett wrote that his estate’s trustee should put 90% of cash in a very low-cost S&P 500 index fund, naming Vanguard specifically.
The fund in this instruction is the Vanguard S&P 500 ETF (VOO).
Also read: Warren Buffett doubles down on stock market message for 2026
Why Buffett tells you to skip stock picking
Buffett is not saying he cannot pick stocks. His record at Berkshire proves otherwise. What he is saying is that most investors do not have the tools Berkshire has.
Berkshire owns operating businesses that throw off billions in cash each year. That cash gives Buffett the ability to hold stocks through long downturns without ever being forced to sell. Most individual investors do not have that cushion.
Active fund managers charge fees that eat into returns year after year. Buffett has argued that those fees, compounded over decades, leave most investors worse off than simply owning the index at a fraction of the cost.
His endorsement of index funds is also practical. You do not need to analyze earnings reports, track management changes or assess competitive threats. You buy the fund and hold it.
What VOO gives long-term investors
VOO tracks the S&P 500. It holds shares in roughly 500 of the largest U.S. companies across technology, healthcare, financials, consumer goods and energy. No single company failure can bring down the fund.
The expense ratio is 0.03% per year. On a $10,000 balance, that is $3 annually. Over 30 years, the difference between paying that and paying a 1% management fee adds up to tens of thousands of dollars in your account rather than your manager’s.
The index rebalances itself. Companies that grow increase their weighting. Companies that shrink or collapse get replaced. You do not have to make any of those decisions.
VOO also pays quarterly dividends from the underlying holdings. Reinvesting those dividends automatically increases your share count over time without any additional contribution from you.
Why young investors have the edge with VOO
A 25-year-old investing in VOO has roughly 40 years before traditional retirement age. That time horizon changes how you should think about short-term losses.
A 20% market decline is painful if you need the money in three years. Over 40 years, it is a footnote. Markets have recovered from every major drawdown in U.S. history, and young investors have the time to wait out the ones that come next.
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Contributing a fixed amount every month regardless of market conditions means you buy more shares when prices are down. That lowers your average cost per share over time without requiring any judgment calls on your part.
Tax-advantaged accounts make the math even better. Contributions to a Roth IRA grow tax-free, and qualified withdrawals in retirement are tax-free. VOO held inside a Roth for 40 years compounds without the drag of annual tax bills on dividends or gains.
What VOO will not protect you from
VOO is a U.S. large-cap fund. It has a heavy weighting toward technology companies. When that sector sells off sharply, VOO goes with it.
The 90% stock and 10% bond split Buffett described was for his estate, not a universal prescription. Your right allocation depends on your income, your expenses, your other assets and how much volatility you can tolerate without selling.
Do not invest in VOO before you have an emergency fund. Three to six months of expenses in cash means a market drop does not force you to liquidate shares at a loss to cover a car repair or a medical bill.
International stocks are also worth considering alongside VOO. The fund holds no foreign companies. A separate international index fund adds exposure to economies and industries outside the United States.
How to start investing in VOO
Capture your employer’s 401(k) match first. If your employer matches 50% or 100% of contributions up to a certain percentage of your salary, that match is an immediate return no market can offer. Contribute at least enough to get it all.
Open a Roth IRA if your income qualifies. The 2026 contribution limit is $7,500. VOO is available on most major brokerage platforms with no transaction fee.
Set up automatic contributions on a fixed schedule. Weekly, biweekly or monthly all work. The point is to remove the decision from the process so market headlines do not interrupt your contributions.
Buffett’s instruction was not complicated: buy a low-cost S&P 500 index fund and hold it. VOO is what that looks like in practice for investors who are just getting started.
Related: Warren Buffett has a stark message for stock market investors
