Warren Buffett’s 1 Vanguard Index Fund Pick Could Turn $500 Monthly Into $986,600

Oracle of Omaha drops bombshell investment advice that bypasses Wall Street complexity.

The Simple Path to Wealth

Forget stock-picking stress and crypto volatility—Buffett's strategy cuts through market noise with brutal efficiency. His Vanguard recommendation transforms modest monthly contributions into life-changing returns without active management.

Compound Interest Magic

That $500 per month doesn't just grow—it multiplies exponentially over time. The fund's low fees silently work in investors' favor while hedge funds charge 2-and-20 for inferior performance.

Why This Beats Crypto Speculation

While digital assets swing wildly, this approach delivers proven wealth-building—a refreshing contrast to NFT rug pulls and meme coin mania. The boring gets brilliant when consistency meets compounding.

Buffett's ultimate jab at finance? The simplest strategy often outperforms the most expensive advisors.

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The pros and cons of the Vanguard S&P 500 ETF

The Vanguard S&P 500 ETF measures the performance of the S&P 500, which itself tracks 500 large U.S. companies. It includes value stocks and growth stocks from all 11 stock market sectors, and covers about 80% of domestic equities and 40% of global equities by market value.

In short, the Vanguard S&P 500 ETF provides exposure to many of the most influential companies in the world. The top 10 positions are listed by weight as follows:

One risk associated with owning an S&P 500 index fund is the extraordinary concentration of the underlying index. Just 10 companies account for 29% of the S&P 500 by market-cap weight, which means a big decline in a few of those stocks could sink the index. However, those companies also account for about 33% of the S&P 500's earnings, so the statistic is not as alarming as many pundits make it out to be.

Why Warren Buffett likes S&P 500 index funds

There is a simple reason Warren Buffett thinks an S&P 500 index fund is the best way for the non-professional investor to get exposure to the stock market: Buying individual stocks requires more dedication that most people are willing to commit, and achieving better returns than the S&P 500 is very challenging.

Indeed, fewer than 15% of large-cap fund managers outperformed the index during the last decade. That means most professional money managers WOULD have been better off buying an S&P 500 index fund. And if that many trained experts struggle to beat the index, then most non-professional investors are likely to fail, too.

"The goal of the non-professional should not be to pick winners," Buffett warned in his 2013 shareholder letter. They should instead seek to "own a cross-section of businesses that in aggregate are bound to do well. An S&P 500 index fund will achieve this goal."

Additionally, the S&P 500 has consistently been a profitable investment over long intervals. The index never produced a negative return over any 15-year period since its inception in 1957. In other words, investors that bought an S&P 500 index fund at any point in the last 68 years has made money, so long as they held the index fund for at least 15 years.

How the Vanguard S&P 500 ETF could turn $500 per month into $986,900

Including dividends, the S&P 500 returned 1,860% in the last three decades, compounding at 10.4% annually. That period encompasses such a broad range of economic and market conditions that similar results are plausible over the next three decades. But I will assume a slightly more conservative return of 10% annually to introduce a margin of safety.

At that pace, $500 invested monthly in an S&P 500 index fund would be worth $95,600 after one decade, $343,600 after two decades, and $986,900 after three decades. You would be hard pressed to find a cheaper index fund with a better track record.

Importantly, the Vanguard S&P 500 ETF has a low expense ratio of 0.03%, meaning shareholders will pay just $3 annually on every $10,000 invested in the fund. Brendan McCann atrecently wrote, "This exchange-traded fund accurately represents the large-cap opportunity set while charging rock-bottom fees, a recipe for success over the long run."

As a final thought, investors need not choose between individual stocks and an S&P 500 index fund. For those willing to do the requisite research, owning both is a smart strategy. Your portfolio will beat the market if your individual stocks outperform, but will not trail the market too badly if your individual stocks underperform. Think of an S&P 500 index fund as a sort of safety net that tethers your return to the entire U.S. stock market.