Warren Buffett spent 60 years beating the market by picking stocks.
His tip for new investors? Don't.
The man many call the best investor alive says most beginners should skip stock picking.
Buffett's Simple Advice
Buffett's tip sounds almost dull. He points new investors to a low-cost index fund.
The fund tracks the S&P 500. That is just a basket of 500 of the biggest US firms.
He stepped down as CEO of Berkshire Hathaway late last year. Greg Abel took over after a 60-year run.
Over that time, Buffett grew Berkshire's stock by about 20% a year. So why tell others not to try?
Most people do not have the time. And even the pros tend to fall short.
We explain the moves that grow a portfolio in plain English each morning in Market Briefs, and you get a free investing masterclass for joining.
Why Index Funds Beat Most Managers
The numbers are rough for stock pickers. Most pro managers lose to the S&P 500 over time.
Why? They trade too much and charge high fees.
Those fees eat into your gains year after year.
A simple way to follow Buffett is the Vanguard S&P 500 ETF. Its fee is just 0.03%.
That means almost nothing comes out of your gains each year. Buying it is like buying the whole team.
You are not betting on one player. Its top holdings are Nvidia, Apple, Microsoft, Amazon, and Alphabet.
The fund also spreads across every part of the market. So you get broad cover in a single buy.
Buffett has made this case for a long time. He once bet a hedge fund boss that an index fund would beat a set of picks over ten years.
Buffett won that bet. The fund left the stock pickers behind.
The Catch
There is a catch. The S&P 500 is priced high right now.
So the next 10 years may look weaker than the last. But the long-run record is strong.
Over 30 years, the index returned about 1,770%. A $10,000 buy back in 1996 would be worth about $187,000 today.
The past 10 years alone returned 316%. That pace is hard to repeat.
The fix for a pricey market is dollar-cost averaging. You just invest a set sum on a set schedule, not all at once.
Buying a little each month smooths out the bumps. You worry less about the perfect day to jump in.
What To Watch
Here is the math that makes the slow path look smart. Put in $10,000 and add $100 a month.
Assume the market's long-run 10% yearly return holds. After 30 years, that is about $382,000.
The trick is to start early and keep at it. Small sums grow large when given enough time.
Past gains are never a promise. But Buffett's bet is that slow and steady beats clever and busy.
If you would rather feel sure than lost about your money, sign up for Market Briefs. Five minutes each morning, plus a 45-minute investing course thrown in when you join.
