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.

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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.

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.