Buffett wants to invest in Index Funds

We keep changing lanes in our quest to find the best mutual fund or stock. That is not why mutual funds were created, however. In the 1920s, mutual funds were first created in the US to offer investors a diversified portfolio of stocks at a reasonable cost. The brokerage cost of buying the 30 Dow Jones (a popular index in the US market) stocks would have been $11,000 as there were no index funds then. The academics in the 1970s did more research on active fund management strategies to find exploitable anomalies. They instead found out that index funds were the perfect vehicles for retail investors to access the stock market.

The Vanguard Group, founded by John C. Bogle, launched the first index fund in 1976. It turned out to be a disaster then. The new fund offer (NFO) could raise only $11 million against the target of $100 million. It was dubbed "Bogle's Folly". Fast forward to 2022. The Vanguard group manages over $8 trillion after 42 years. That is a trillion with a “T”

Even Warren Buffett, who is a revered active investor, wants his inheritance to his wife invested in the Vanguard S&P500 index fund. He feels an index fund, not Berkshire Hathaway shares, would suit his wife better, who does not know much about the share market.

If you invested in a very low cost index fund - where you don't put the money in at one time, but average in over 10 years - you'll do better than 90% of the people who start investing at the same time.

– Warren Buffet –

What do you think - Can broad-based Index Funds be your “Core” Portfolio?

Regards,

Anish