Warren Buffett's ETF Recommendation, What He Actually Owns and Why

Quick Answer

Warren Buffett's recommendation for most investors is straightforward: own a low-cost S&P 500 index fund, with the Vanguard S&P 500 ETF (VOO) being his suggested vehicle. He has consistently stated that for the average person, buying the entire market through an index fund beats trying to pick individual winning stocks.

However, Buffett's personal holdings through Berkshire Hathaway tell a different story—he primarily owns individual businesses and has recently sold Berkshire's entire position in S&P 500 ETFs.

Key Facts

• Buffett recommends the S&P 500 index fund for most investors, specifically suggesting Vanguard's offering.
• Berkshire Hathaway sold its entire position in S&P 500 ETFs, including the SPDR S&P 500 ETF Trust, by the end of 2024, according to a 13F filing.
• Buffett liquidated roughly $184 billion in equity through 2024 and 2025, including massive stakes in Apple and Bank of America.
• The Vanguard S&P 500 ETF (VOO) tracks the S&P 500 index, holds 504 stocks as of March 31, 2026, and carries a 0.03% expense ratio.
• Buffett's famous 2013 instruction to his trustee: put 10% of cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.
• Berkshire Hathaway's long-term performance far exceeds the index: a 5.5 million% cumulative return for Buffett versus 39,000% for the S&P 500.
• In 2024, Berkshire was a net seller of publicly traded stocks for nine consecutive quarters but made a new purchase of Constellation Brands.

Why Buffett's Advice and His Actions Differ

The gap between what Warren Buffett recommends and what Berkshire Hathaway actually does can confuse investors. Understanding this distinction matters because it reveals something important about how to use his advice.

The advice is for people who don't want to study businesses. Buffett has said repeatedly that for most people, the best thing to do is own the S&P 500 index fund. He said this at Berkshire's 2020 annual meeting, and he has repeated variations of this guidance for decades.

The logic is simple: most people lack the time, temperament, or training to evaluate businesses properly. Rather than guess wrong and lose money, they should buy the entire market at rock-bottom cost and hold for decades.

His personal approach is different because he is different. Buffett has spent more than six decades studying businesses, reading financial statements, and developing a framework for evaluating competitive advantages. His cumulative return of 5.5 million% versus the S&P 500's 39,000% demonstrates that his skill is real and durable.

But that performance gap also illustrates his point: he is the exception, not the rule. The data from SPIVA (S&P Indices Versus Active funds) consistently shows that most actively managed funds fail to beat their benchmark over long periods.

What Berkshire's ETF sale actually means. When Berkshire sold its S&P 500 ETF positions by the end of 2024, some investors interpreted this as Buffett losing faith in index funds. That reading misunderstands the situation.

Berkshire's ETF holdings were a small part of a massive portfolio, likely held for liquidity or operational reasons rather than as a core investment thesis. The sale coincided with a broader liquidation of roughly $184 billion in equity through 2024 and 2025—including large stakes in Apple and Bank of America.

This looks like portfolio management at the institutional scale, not a comment on the validity of index investing.

The Timing Question

Buffett's equity sales came ahead of market turbulence. Whether he timed the market perfectly or simply decided that valuations were unattractive is a matter of interpretation.

What matters for the average investor is this: the advice to own the S&P 500 index fund was never about timing. It was about time in the market.

The instruction Buffett gave for his trustee's handling of his estate is the clearest statement of his actual beliefs. He said to put 10% in short-term government bonds and 90% in a very low-cost S&P 500 index fund, specifically suggesting Vanguard's.

This is not advice designed for a specific market condition. It is designed to work across all market conditions, including the turbulence he apparently anticipated.

What Makes the Vanguard S&P 500 ETF the Default Choice

When Buffett says "S&P 500 index fund" and suggests Vanguard, he is pointing to a specific combination of features that matter for long-term investors. The Vanguard S&P 500 ETF (VOO) is not the only S&P 500 ETF, but it has characteristics that align with Buffett's stated priorities.

Cost is the primary driver. The expense ratio for VOO is 0.03%. That means for every $10,000 invested, the annual fee is $3.

Compare that to the average actively managed mutual fund, which typically charges well over 1% per year. Over a 30-year investing horizon, that fee difference compounds into a significant gap in ending wealth.

Buffett has long argued that low costs are the closest thing to a guaranteed advantage in investing, because fees are the one expense the investor can control with certainty. The index itself does the stock picking. The S&P 500 includes roughly 500 of the largest U.S.

companies, chosen by a committee based on size, liquidity, and profitability criteria. Because the index changes infrequently, the fund trades much less than an active manager would.

This means lower transaction costs and lower taxable distributions, which Buffett has noted as an additional advantage of index funds. Diversification without dilution. The S&P 500 is concentrated in large-cap U.S.

stocks, with technology, financials, and communication services as the top three sectors as of March 31, 2026. The index includes 504 stocks because some companies, like Alphabet, have multiple share classes (GOOG and GOOGL).

This concentration means investors get exposure to the companies that have driven most of the U.S. market's long-term returns, while still maintaining enough diversification to avoid catastrophic single-stock risk.

Dividend Characteristics

VOO currently yields approximately 1.09% on a trailing twelve-month basis, with a four-year average dividend yield of 1.39%. The fund has grown its dividend at a 5.56% compound annual rate over three years and has increased distributions for five consecutive years.

For investors in the accumulation phase, this dividend is not the main attraction—the total return matters more. But for retirees or income-focused investors, the growing dividend stream provides a hedge against inflation without requiring the sale of shares.

The dividend growth is a function of the underlying companies. The S&P 500's constituent companies have historically increased their payouts over time, which is why the fund's yield on cost rises steadily for long-term holders.

This is a structural feature of owning profitable, established businesses.

What Buffett Actually Owns and What That Means for You

Berkshire Hathaway's public stock portfolio is a window into how Buffett invests when he is acting as a professional capital allocator rather than a public adviser. The contrast with his index fund advice is instructive.

Berkshire owns businesses, not the market. Berkshire's portfolio has historically been concentrated in a relatively small number of high-quality businesses with durable competitive advantages. Companies like Apple, Coca-Cola, and Bank of America have been core holdings for years.

This is the opposite of index investing—Berkshire is making large, concentrated bets on specific companies that Buffett and his team have studied deeply. The 2024-2025 liquidation. Berkshire sold roughly $184 billion in equity through 2024 and 2025, including massive stakes in Apple and Bank of America.

The company also sold its entire position in S&P 500 ETFs by the end of 2024. This is not a sign that Buffett abandoned his investment philosophy.

It is a sign that he saw better opportunities elsewhere—or that he preferred to hold cash and short-term government securities at those valuation levels. What this means for the individual investor. If Buffett himself is selling equities, should you sell your index fund?

The answer depends entirely on your situation. Buffett is managing a massive institution with different obligations, including insurance float, potential acquisitions, and the need to preserve capital for Berkshire's specific liabilities.

An individual investor with a 20-30 year time horizon faces a completely different optimization problem. The honest analysis is this: Buffett's selling is information about how he views current market valuations, but it is not a signal for the average investor to abandon a long-term index fund strategy.

His advice to his trustee—90% in a low-cost S&P 500 index fund—was made with the knowledge that markets fluctuate and that the only way to capture the index's long-term return is to remain invested through the downturns.

The "Thick and Thin" Principle

One of Buffett's most direct pieces of guidance for index investors is the instruction to keep buying "through thick and thin, and especially through thin." This means continuing regular contributions even when markets are falling. The logic is straightforward: when prices drop, the same dollar buys more shares, and the long-term compounding effect is enhanced by purchasing at lower valuations.

This is harder than it sounds. Human psychology pushes investors to buy when prices are rising and sell when they are falling.

The data on fund flows confirms that retail investors tend to do exactly the opposite of what works. Buffett's advice is essentially a behavioral prescription: automate your contributions, ignore the noise, and let the compounding do the work.

How to Apply Buffett's Advice in Practice

Taking Buffett's recommendation seriously requires more than buying a single ETF and hoping for the best. There are practical decisions about which fund to choose, how to structure contributions, and how to handle the emotional challenges of long-term investing.

Choosing Between VOO and Alternatives

The Vanguard S&P 500 ETF is the fund Buffett specifically suggests, but it is not the only option. The SPDR S&P 500 ETF Trust (SPY) tracks the same index and is the most heavily traded ETF in the world.

The iShares Core S&P 500 ETF (IVV) is another low-cost option. All three track the same index, so the difference comes down to expense ratio, liquidity, and the specifics of the brokerage account.

For most investors, VOO's 0.03% expense ratio is essentially free. The differences between these funds are so small that the choice matters less than the decision to own one of them at all.

What matters far more is the contribution rate, the holding period, and the discipline to stay invested.

Structuring Contributions

A monthly $300 investment in VOO has the potential to grow to $1 million given sufficient time and the index's historical return pattern, though this depends on the specific return assumptions and time horizon. The key is consistency.

Automating contributions ensures that the "buying through thin" advice is actually followed, because the automatic purchase happens regardless of market conditions. For investors with access to tax-advantaged accounts like 401(k)s or IRAs, those should be the first place to hold index funds.

The tax deferral compounds the advantage of low costs. In taxable accounts, the index fund's low turnover means fewer taxable events, but there is still a tax drag that can be minimized by holding for the long term.

The Role of the 10% Bond Allocation

Buffett's trustee instruction includes 10% in short-term government bonds. This is not a market-timing allocation.

It is a capital preservation buffer that provides three benefits: liquidity for unexpected needs, a psychological anchor during market crashes, and a source of funds to rebalance into stocks when prices fall. For younger investors with stable incomes, a 10% bond allocation might be conservative.

For retirees or those nearing retirement, it might be too aggressive. The right allocation depends on personal circumstances, but the principle Buffett emphasizes is that the stock portion should be the overwhelming majority for those with a long time horizon.

Avoiding the Mistakes That Destroy Returns

The most common errors Buffett identifies in investor behavior are trading too much, trying to time the market, and paying high fees. Index funds solve the fee problem.

Automatic contributions and a long holding period solve the trading problem. The timing problem is solved by not attempting to time at all—by maintaining the same contribution schedule regardless of whether the market is up or down.

There is also the danger of comparing your portfolio to someone else's. Berkshire Hathaway's concentrated bets on individual stocks have produced extraordinary returns over six decades, but attempting to replicate that approach without Buffett's skill is a recipe for disappointment.

The index fund is the honest acknowledgment that most people cannot consistently pick winning stocks, and the data supports this humility.

Frequently Asked Questions

Did Warren Buffett sell his S&P 500 ETF holdings?

Yes. According to a 13F filing released in February 2025, Berkshire Hathaway sold its entire position in S&P 500 ETFs, including the SPDR S&P 500 ETF Trust, by the end of 2024.

This was part of a broader liquidation of roughly $184 billion in equity through 2024 and 2025. However, Buffett's personal recommendation for the S&P 500 index fund for most investors has not changed.

Is the Vanguard S&P 500 ETF (VOO) the same thing Buffett recommends?

Buffett has specifically suggested Vanguard's S&P 500 index fund in his famous trustee instructions and has mentioned Vanguard by name. VOO is the ETF version of Vanguard's S&P 500 index fund.

It tracks the same index, holds 504 stocks, and charges a 0.03% expense ratio as of the most recent data.

Should I sell my index funds because Buffett sold his?

Buffett's sell decisions at Berkshire reflect institutional considerations—portfolio scale, valuation views, and Berkshire's specific obligations. His advice for individual investors has consistently been to own a low-cost S&P 500 index fund and hold it through market cycles.

The instruction to "keep buying it through thick and thin, and especially through thin" suggests the opposite of selling during uncertainty.

Why does Buffett recommend index funds if he doesn't use them for Berkshire?

Buffett's skill at selecting individual businesses is extraordinary, as shown by his 5.5 million% cumulative return versus the S&P 500's 39,000% since 1965. But he recognizes that this skill is rare.

For most people, owning the entire market at low cost is a more reliable path to wealth than attempting active stock selection. His recommendation is calibrated to the average investor's abilities and constraints.

What percentage of my portfolio should be in an S&P 500 index fund?

Buffett's trustee instruction was 90% in a low-cost S&P 500 index fund and 10% in short-term government bonds. This is a reasonable starting point for investors with a long time horizon who can tolerate significant drawdowns.

Investors with shorter time horizons or lower risk tolerance might adjust the bond allocation upward, but the core principle—overwhelming majority in a diversified, low-cost stock index fund—remains the foundation.

Reference Notes

Information in this article is based on publicly available sources. Some details may change over time.

Verify with official sources before acting. Specific fund data such as expense ratios, dividend yields, and holdings counts reflect figures reported as of early 2026 and may be updated by the fund provider.

The reference material includes coverage from Forbes, CNBC, Investopedia, The Motley Fool, and public 13F filings discussed in those reports.