Key Points
In a past shareholder letter, Warren Buffett has stated that his will directs for a trust invested 90% in the S&P 500 and 10% Treasury bills for his wife.
In the letter, he also stated: "I suggest Vanguard's." Based on that, Buffett would almost certainly give these two Vanguard ETFs his stamp of approval.
Many people would put Warren Buffett in the pantheon of all-time successful investors. So it's no surprise that a lot of them want to replicate what he's done.
Even though he's no longer the CEO of Berkshire Hathaway, the Wall Street community listens very closely to what he says. If you go back and listen to some of his past shareholder meeting speeches, he endorses some very specific strategies that go beyond just Berkshire's individual stock positions.
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Based on this, I think there are two ETFs he would endorse today. You probably wouldn't be surprised that both of them come from Vanguard.
Image source: Getty Images.
Key takeaways
- In a 2013 letter to Berkshire Hathaway shareholders, Buffett endorses investing in the S&P 500 and Treasury bills for most investors.
- He called for an asset allocation of 90% in a low-cost S&P 500 fund and 10% in short-term government bonds.
- Buffett specifically mentioned Vanguard as his preferred fund provider.
- Together, a pair of Vanguard ETFs deliver a Buffett-endorsed portfolio.
Why he chooses the S&P 500 and Treasury bills
Over the years, Warren Buffett has advocated for two ideas: Low cost and simplicity. Nowhere is this more apparent than in the plans he's established for his eventual passing.
Buffett said in his 2013 letter to Berkshire Hathaway shareholders: "What I advise here is essentially identical to certain instructions I've laid out in my will. ... 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 suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors."
He's essentially saying that a portfolio consisting mostly of U.S. large-cap stocks for growth and short-term Treasury bills for safety and liquidity is pretty much all most investors need -- and, of course, to keep costs as low as possible.
If he's mentioning Vanguard specifically, it's easy to consider the Vanguard S&P 500 ETF(NYSEMKT: VOO) and the Vanguard 0-3 Month Treasury Bill ETF(NASDAQ: VBIL) as the perfect Buffett two-ETF portfolio.
VOO & VBIL: A side-by-side look
| Metric | VOO | VBIL |
|---|---|---|
| Category | U.S. large-cap equity | Ultra-short U.S. Treasuries |
| Expense ratio | 0.03% | 0.06% |
| AUM | $837 billion | $7.3 billion |
| Yield | 1.2% | 3.6% |
| Inception | 2010 | 2025 |
| Buffett role | Long-term core growth | Safety and liquidity |
Data source: Vanguard.
These ETFs could be used collectively or individually. The S&P 500 makes an ideal long-term core portfolio holding for almost anyone, although I'd still prefer the Vanguard Total Stock Market ETF(NYSEMKT: VTI) for this purpose. And if you need a sleeve of your portfolio to generate income or just wait to be put to use in equities at the right time, Treasury bills make all the sense in the world.
If you use the Vanguard S&P 500 ETF and the Vanguard 0-3 Month Treasury Bill ETF for these purposes, Buffett would probably give the thumbs-up.
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David Dierking has positions in Vanguard Total Stock Market ETF. The Motley Fool has positions in and recommends Berkshire Hathaway, Vanguard S&P 500 ETF, and Vanguard Total Stock Market ETF. The Motley Fool has a disclosure policy.
