Warren Buffett has shed some of his investment advice for retirees. If you know anything about Buffett’s wealth and expertise on the subject, and the fact that he is probably the greatest stock picker of our time, it’s important to take a listen. Buffett delivered his advice in a letter to Berkshire Hathaway shareholders. He gave an overall view of what he thinks are good investments for the long term. His advice comes from what he is planning on putting in his will as to how the money he is going to leave his wife should be invested. Buffett states, “my advice to the trustee could not be more simple: Put 10 percent of the cash in a short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)”
Buffett’s advice is in line with what studies have concluded. Mutual funds that are actively managed often do not perform as well as low-cost index funds, when looking at the long term. This is because managed funds charge you with fees and sometimes do not make back those fees with outsized gains. Though Buffett made his fortune with stock picking it seems that his strategy for maintaining it in the long run lies in low-cost index funds.
Buffett continues to believe in America and it seems that he favors investors staying here as well. He wrote to Berkshire shareholders, “Indeed, who has ever benefited during the past 237 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. And the dynamism embedded in our market economy will continue to work its magic. America’s best days lie ahead.” It is hard not to get swept up in his infectious optimism.