Warren Buffett’s 90/10 Portfolio, Rebuilt With Two ETFs That Pay a 11% Yield

Buffett's instructions call for 90% of the designated cash for his wife's benefit to be invested in a low-cost S&P 500 index fund and 10% in short-term government bonds.

SPYI charges 0.68%, currently distributes 12.15%, and uses an actively managed S&P 500 call strategy. Its September 19a-1 notice estimated 94% of the latest distribution as ROC.

CSHI combines one-to-three-month Treasury bills with an SPX put-spread strategy. Its current 5% distribution rate is around one percentage point above the Fed's current 3.75%-4.00% target range.

Warren Buffett's transition at Berkshire Hathaway is now essentially complete. On Sept. 18, Berkshire announced that Buffett had become Chairman Emeritus while remaining a director, with his son Howard G. Buffett taking over as Chairman. Greg Abel remains CEO and runs the company, while Buffett described Howard's role as safeguarding Berkshire's culture and values. At 96, Buffett acknowledged the obvious reason for completing the transition: "Father Time always wins."

Buffett has also been unusually specific about what should happen to part of his family's money after his death. In his 2013 shareholder letter, he disclosed instructions for a trustee managing cash for his wife's benefit: put 90% into a very low-cost S&P 500 index fund and the remaining 10% into short-term U.S. government bonds. That's an extremely simple 90/10 portfolio, and for long-term accumulation, I wouldn't argue much with it.

But income investors tend to want more cash flow than a conventional S&P 500 ETF and T-bills provide. You can increase the distributions, although you need to acknowledge the trade-off upfront: options overlays cost more and can cause the portfolio to underperform its long-only equivalent on a total-return basis. Investors clearly like these strategies anyway.

So here's how I'd rebuild Buffett's basic 90/10 allocation for income using two ETFs from NEOS Investments: 90% in the NEOS S&P 500 High Income ETF (SPYI) and 10% in the NEOS Enhanced Income 1-3 Month T-Bill ETF (CSHI) .

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