Key Points
-
Warren Buffett made a fortune picking stocks and holding onto his winners for decades.
-
Buffett understands that most investors lack the resources and time to research stocks.
-
In a shareholder letter from 2013, Buffett revealed his preference for Vanguard index funds.
- 10 stocks we like better than Vanguard S&P 500 ETF ›
Known as the Oracle of Omaha, Warren Buffett transformed Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) from a generic textile manufacturer into one of the world’s most valuable companies. Between 1965 and 2025, Berkshire Hathaway stock generated a compounded annual return of 19.7%. The S&P 500 (SNPINDEX: ^GSPC) generated 10.5% including dividends!
Buffett stepped down as Berkshire’s chief executive officer at the end of 2025, handing over the position to Greg Abel. Last month, he relinquished the chairman’s role to his son, Howard Buffett. Today, Buffett remains a member of Berkshire’s Board of Directors and serves as chairman emeritus.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
Buffett’s greatest legacy isn’t his remarkable ability to pick stocks. Rather, it’s surprisingly simple advice he gave to everyday investors. Following that advice could turn a modest monthly investment into hundreds of thousands of dollars. Let’s explore how that happens.
Image source: Getty Images.
Understanding Warren Buffett’s investment philosophy
Rather than trading stocks, Buffett built his fortune by identifying high-quality businesses and holding them long periods. Buffett’s investment philosophy encompasses owning companies with durable competitive advantages, recognizable brands, capable management teams, and business models that can generate profits for decades.
Berkshire’s ownership of blue chip businesses showcases Buffett’s preference for companies that sell products and services consumers consistently need and therefore can create value over many years.
Of course, Buffett understands that most investors lack the time, expertise, or desire to research individual stocks. That’s where his advice becomes particularly interesting.
Image source: Getty Images.
Buffett loves Vanguard funds
In a shareholder letter from 2013, Buffett explained that he had instructed the trustee responsible for a portion of his wife’s inheritance to invest 90% of the money in a low-cost S&P 500 index fund. He specifically recommended Vanguard as the provider.
That brings me to the Vanguard S&P 500 ETF (NYSEMKT: VOO). The Vanguard S&P 500 ETF is an exchange-traded fund designed to track the performance of the S&P 500 index. Rather than picking individual stocks, investors can purchase VOO to gain immediate exposure to hundreds of businesses with a single investment.
The fund’s holdings include companies such as Apple, Microsoft, Nvidia, Alphabet, and Amazon, alongside businesses in healthcare, financial services, consumer products, and major industries. That diversification reduces the risk associated with any single company. One thing to note is the Vanguard S&P 500 ETF isn’t equally weighted, meaning its largest holdings account for a substantial weighting in the fund.
VOO charges an annual expense ratio of just 0.03%, meaning investors only pay $3 a year for every $10,000 invested. Those minimal fees allow investors to retain more of their gains.
Most importantly, since the Vanguard S&P 500 ETF tracks the broader market, investors do not need to constantly research stocks or pick which companies they think will outperform next year. Instead, they can focus on consistently contributing to their position and allow their money to grow passively.
Here is what $200 a month in VOO can grow to
Suppose you start by investing $1,000 into the Vanguard S&P 500 ETF and then contribute another $200 every month for 30 years. Over that period, your total contribution would be $73,000.
Historically, the S&P 500 has generated an average annual return of approximately 10% over the long run, including reinvested dividends. Since VOO seeks to track the S&P 500 index, I’ll assume a consistent 10% effective annual return. Thanks to compound returns, the total sum would grow to roughly $430,000 after 30 years. That’s nearly six times the contribution amount!
This illustration explains how you don’t need to become an expert stock picker to create meaningful long-term wealth. A simpler approach is to purchase a diversified, low-cost index fund like the Vanguard S&P 500 ETF and remain patient. Sometimes, the most powerful investing strategy is simply to buy, hold, and let time do the heavy lifting.
Should you buy stock in Vanguard S&P 500 ETF right now?
Before you buy stock in Vanguard S&P 500 ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $380,363!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,315,732!*
Now, it’s worth noting Stock Advisor’s total average return is 919% — a market-crushing outperformance compared to 211% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of October 19, 2026.
Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
