Warren Buffett, the CEO of Berkshire Hathaway, has a $295 billion portfolio of 45 publicly traded stocks and securities. He also owns businesses and has a $325 billion cash stockpile. Since 1965, Berkshire Hathaway has had a compound annual return of 19.8%, beating the S&P 500’s average annual return of 10.2%.
Buffett says the average retail investor would struggle to copy his investing success. He often tells small investors to buy exchange-traded index funds (ETFs) instead. Berkshire owns stakes in two such funds: the Vanguard S&P 500 ETF and the SPDR S&P 500 ETF Trust.
Both ETFs track the S&P 500 index, but the Vanguard fund may be better for most investors due to its low cost. One Wall Street analyst predicts the Vanguard S&P 500 ETF could deliver a 150% return by 2030. This ETF holds 500 of the largest U.S. companies across all 11 sectors of the economy.
Companies in the S&P 500 must have a market cap of at least $18 billion and be profitable over the past 12 months. The index is adjusted quarterly to ensure only high-quality companies are included.
Buffett’s investment advice for beginners
The Vanguard S&P 500 ETF mirrors the S&P 500 by holding the same stocks with similar weightings. Its expense ratio is just 0.03%, making it one of the cheapest ETFs available. The SPDR S&P 500 ETF Trust has an expense ratio of 0.09%.
The S&P 500 is weighted by market cap, so larger companies have more influence. The technology sector, led by Nvidia, Apple, and Microsoft, has a 31.7% weighting. These companies are leaders in artificial intelligence (AI), which is expected to drive substantial economic value in the coming years.
Berkshire Hathaway is the seventh-largest holding in the Vanguard ETF, along with Tesla, JPMorgan Chase, and Costco Wholesale. Tom Lee from Fundstrat Global Advisors says the S&P 500 could reach 15,000 by 2030, a 150% increase. He bases this on demographic trends and the growing influence of AI driving an automation and productivity boom.
However, global recessions, economic shocks, or AI underperforming could delay this growth. Even if the S&P 500 doesn’t reach 15,000 by 2030, historical trends suggest it will get there eventually. For retail investors, Buffett’s advice to invest in a diversified ETF like the Vanguard S&P 500 could be a wise long-term strategy.
