Warren Buffett: "I would rather be 100x too cautious than 1% too incautious — and that will continue as long as I'm around."
Munger: "If we had used the leverage that a lot of successful operators did, Berkshire would be a lot bigger — but we would have been sweating at night." pic.twitter.com/ibITpEtZ3v
— Kevin Carpenter (@kejca) October 16, 2024
Warren Buffett, the renowned investor and CEO of Berkshire Hathaway, has a portfolio that includes two S&P 500 index funds. These funds, the SPDR S&P 500 ETF Trust and the Vanguard S&P 500 ETF, have shown remarkable performance over time. The SPDR S&P 500 ETF Trust, which Berkshire owns 39,400 shares of, has a particularly impressive track record.
An initial investment of $10,000 when the fund launched in January 1993 would be worth around $233,320 today. This translates to an average annual return of nearly 10.5%. Several factors have contributed to the ETF’s success.
Berkshire Hathaway's two biggest stock holdings both hit new 52-week highs today.
• Apple: $237.49
• American Express: $281.42Berkshire itself is almost back to a $1 trillion market cap, too.
— Kevin Carpenter (@kejca) October 15, 2024
Time is a crucial element, as the longer investment period has allowed the fund to grow significantly. Diversification across 500 companies in various sectors and industries has also played a role in spreading risk. The ETF’s regular rebalancing ensures that it holds the strongest performers while eliminating weaker stocks.
Warren Buffett Indicator hits 199%, the highest level in history, surpassing the Dot Com Bubble and the Global Financial Crisis 🚨 pic.twitter.com/w5qRdLZwPb
— Barchart (@Barchart) October 16, 2024
Reinvested dividends have also boosted returns substantially.
Warren Buffett and Berkshire Hathaway $BRK.B are currently trading back over a $1 TRILLION market cap pic.twitter.com/mVCq1XMrec
— Evan (@StockMKTNewz) October 16, 2024
Buffett’s top S&P 500 ETFs
Without reinvestment, a $10,000 investment would have grown to approximately $130,560, which is still decent but considerably less than $233,320.
Despite having a slightly higher expense ratio of 0.0945% compared to the Vanguard S&P 500 ETF’s 0.03%, the SPDR S&P 500 ETF’s costs remain relatively low. This has enhanced its ability to generate returns over time. While past performance does not guarantee future results, the fundamentals that drove the SPDR S&P 500 ETF’s success are likely to continue supporting strong performance.
However, the Vanguard S&P 500 ETF’s lower expense ratio could give it a slight edge in long-term returns. Tom Lee, a well-regarded Wall Street analyst from Fundstrat Global Advisors, has made bullish predictions for the S&P 500. He believes the index could reach 15,000 by 2030, representing a compound annual growth rate of 16.6% over the next six years.
Lee cites demographic trends and advances in artificial intelligence as potential catalysts for this growth. Even if the S&P 500 doesn’t hit Lee’s target by 2030, its historical performance suggests it will eventually reach that milestone. Therefore, investing in an S&P 500 index fund remains a prudent strategy for long-term investors, aligning with Buffett’s recommendation.
