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April 04, 2014 at 01:17 PM
What ultra-hot investments is the world’s greatest investor, Warren Buffett, recommending right now? Bitcoin? High-tech venture capital? Vintage Ferraris? Marijuana stocks?
Buffett’s most recent letter to Berkshire Hathaway shareholders gives us a clue: “What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. My advice to the trustee could not be more simple.
“Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions, individuals – who employ high fee managers,” he added.
Since the vast majority of ETFs are linked to market indexes, Buffett’s advice to buy plain-vanilla index funds is a friendly invasion of sorts.
Three Key Plays
Three ETFs tracking the S&P 500 that carry annual expenses under 0.10% and would match Buffett’s description of low cost are the iShares Core S&P 500 (IVV, 0.07%), the SPDR S&P 500 ETF (SPY, 0.09%), and the Vanguard S&P 500 ETF (VOO, 0.05%).
For exposure to short-term government bonds, two good choices are the iShares 1-3 Yr Treasury Bond ETF (SHY, 0.15%) or the Schwab Short-Term U.S. Treasury ETF (SCHO, 0.08%).
