Warren Buffett Has Endorsed the Same Investment for Decades. History Backs Him Up.

Warren Buffett became one of the wealthiest people in the world by picking individual stocks and holding them for years. But he doesn't think retail investors should do the same. Instead, he's spent the past several decades advocating for a much simpler strategy. Buffett, the retired CEO of investing conglomerate Berkshire Hathaway, thinks most people should just buy an index fund tracking the S&P 500 (SNPINDEX: ^GSPC) and hold it indefinitely.

In 1993, Warren Buffett wrote that an investor without the sophistication to evaluate individual companies could outperform most investment professionals by simply investing in an index fund. More than two decades later, he made a 10-year bet with Protégé Partners co-founder Ted Seides that a low-cost Vanguard S&P 500 fund would outperform a group of hedge funds selected by an investment professional. The index fund won easily.

Today, the Vanguard S&P 500 ETF (NYSEMKT: VOO) provides one of the easiest ways to follow Buffett's advice. But why would one of history's best stock pickers recommend that most people shouldn't try to pick stocks? The numbers provide a pretty convincing answer.

Source: Motley Fool.

Beating the S&P 500 is harder than it looks

Unfortunately, professional money managers have a pretty dismal track record of providing better performance for their clients. According to S&P Dow Jones Indices, 79% of actively managed large-cap U.S. funds underperformed the S&P 500 in 2025. The longer-term picture is even worse. 86% underperformed over a 10-year period, 90% over 15 years, and 93% over 20 years through the end of 2025. High fees and the inability to consistently pick winners are usually to blame.

That's an important lesson for investors. Even the best struggle to outperform with any consistency.

Outperforming involves a series of factors working in your favor. You need to keep picking winners more often than not and do it over and over again. It's an incredibly difficult task.

The Vanguard S&P 500 ETF eliminates the need to do any of that. You don't need to identify individual winners and losers. You don't need to figure out who's going to lead the U.S. economy 10-20 years from now. As companies become more successful and their stock prices grow, they account for a larger percentage of the index. You automatically have more exposure to outperformers and less exposure to laggards.

Buffett's biggest advantage is available to all investors

Most investors don't have the time, knowledge, or ability to analyze companies the way Buffett does. But they can copy his greatest trait of all -- patience.

A lot of people are tempted to try to time the market. They usually end up doing more damage than good by selling after stocks have already fallen and failing to get back in until they've already recovered.

Buffett's advice is simple: Invest in the S&P 500, keep making regular investments no matter what the market is doing, and hold on to your investment for years, if not decades. Investing ends up being one of the few things where the rewards can be greater by doing less work.

The Vanguard S&P 500 ETF is the perfect tool to use for this. It's incredibly cheap, easily tradable, and ideal as a core long-term portfolio holding.

There will always be reasons to sell. Recessions, inflation, wars, bubbles, and bear markets aren't going away. But the key is how you handle them. By maintaining discipline and staying the course, your portfolio can withstand almost any short-term down market.

Buffett's advice works because it removes many of the decisions that cause investors to underperform in the first place. For most investors, the path to wealth depends less on finding the next great stock and more on simply being invested in the first place.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.