Warren Buffett has always strongly believed in two things: the strength of American companies and the benefits of long-term investing. And if you put these elements together, you can construct an investing strategy that’s likely to score a win. But first, let’s consider why we should listen to the billionaire.
At the helm of Berkshire Hathaway, Buffett has proven his investing excellence for 59 years. During that time, he’s helped generate a compounded annual gain of almost 20%, surpassing the 10% compounded increase of the S&P 500 index. Throughout that time, Buffett encountered a range of market environments, from times of exuberance to recessions and market crashes. Yet, he’s scored a major long-term win, and that’s why it’s a great idea to consider his investing advice.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
So, how can you use those two Buffett beliefs I mentioned above to reach your own investing victory? Part of the plan involves buying shares of a Buffett-approved Vanguard fund, and the other part involves a steady, long-term commitment to it. Let’s check out how you could potentially turn $300 per month into $1 million.
First, let’s consider exactly why Buffett is so confident about American companies. It has to do with their long-standing track record of success. In Buffett’s letter to shareholders back in 2013, he wrote, “American business has done wonderfully over time and will continue to do so.”
And his optimism has not wavered, with Buffett writing the following in his 2023 shareholder letter: “I can’t remember a period since March 11, 1942 — the date of my first stock purchase — that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good.” He went on to write: “America has been a terrific country for investors.”
To benefit from the best the U.S. has to offer, you could and should individually pick stocks. But to complement this effort and pretty much ensure gains over time, it’s a great idea to buy an asset that offers exposure to a wide variety of the very best American companies. And this instrument is a fund that tracks the S&P 500. Buffett has mentioned the Vanguard S&P 500 ETF (NYSEMKT: VOO) in his shareholder letters and has even invested in this fund himself.
In fact, Buffett says that funds tracking the S&P 500 are an ideal choice for the nonprofessional investor, thanks to their inclusion of so many top companies. ETFs, or exchange-traded funds, mimic the composition of their index of reference and, therefore, its performance. In this case, that would be the S&P 500, which, as mentioned, has delivered a double-digit annualized gain over time.
