Why the Legendary Investor's S&P 500 Recommendation Still Holds Water—Even as His Company Made Different Moves

Following Strategy Over Tactics

When a name like Warren Buffett speaks about investing, people listen. The architect of Berkshire Hathaway’s trillion-dollar empire has consistently championed one core message for everyday investors: stick with the S&P 500 through a low-cost ETF. It sounds straightforward, almost too simple. Yet in late 2024, Berkshire liquidated its entire position in the Vanguard S&P 500 ETF (VOO), leaving many wondering whether they should mimic the corporation’s portfolio moves or heed the Oracle’s long-standing counsel.

The tension between these two signals highlights a crucial investing truth—what works for a mega-cap corporation with dedicated research teams and billions in assets may not align with your personal financial situation.

The Real Game Isn’t the Same

Here’s the core insight: Berkshire Hathaway and you aren’t playing the same sport, even though you both want returns. The conglomerate operates with legions of analysts combing through valuations, researching businesses around the clock, and managing complex risk portfolios across multiple asset classes. They have the luxury of making tactical shifts based on macro conditions and relative valuations.

The average investor doesn’t have those resources. What you need is a strategy that compounds wealth reliably without requiring daily market analysis or constant repositioning. This is precisely why Buffett’s recommendation around S&P 500 index investing remains so powerful—it removes friction from the wealth-building equation.

The Case for Broad Market Exposure

When you buy into VOO or a similar S&P 500 ETF, you’re gaining three immediate advantages:

Low-cost access: One of the most compelling reasons to choose an S&P 500 ETF is how fees directly impact your long-term returns. Do ETFs have fees? Absolutely—but VOO’s 0.03% expense ratio is remarkably efficient, meaning you keep more of your gains working for you instead of losing them to overhead costs. Over decades, this modest fee structure can preserve tens of thousands of dollars in cumulative wealth.

Diversification across the economy: The ETF holds approximately 500 companies spanning every major U.S. sector. Yes, the concentration has shifted as mega-cap technology stocks—Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta, and Tesla—now represent roughly 34% of the fund. But this still leaves significant exposure across Financials (13.5%), Consumer Discretionary (10.5%), Healthcare (8.9%), and beyond. This breadth protects you against sector-specific downturns.

Quality by design: S&P 500 membership requires meeting rigorous financial and market-cap thresholds. These aren’t speculative plays; they’re established businesses with proven resilience and resources to navigate economic cycles.

Compounding with America’s Growth Trajectory

The deeper rationale for indexing the S&P 500 rests on a fundamental bet: the United States economy will continue expanding over your investment lifetime. Buffett framed it simply—betting against America over 240 years has been disastrous, and that logic hasn’t expired. Since launching, VOO has delivered returns that have substantially outpaced inflation and rewarded patient capital.

Admittedly, past performance doesn’t guarantee future results. However, the structural advantages remain intact—500 well-capitalized companies, diversified sectors, and a fee structure that doesn’t erode your compounding engine. This is why many regard S&P 500 index funds as a portfolio foundation rather than a speculative bet.

Your Situation Demands Your Strategy

The key takeaway: Your investments must reflect your personal circumstances—your risk tolerance, time horizon, financial goals, and available capital for research and monitoring. Berkshire’s decision to exit VOO reflects its unique position as a capital allocator hunting for mispricings and tactical opportunities. Your position is different.

For most people accumulating wealth over 20, 30, or 40 years, the simplicity and efficiency of consistent S&P 500 index investing—facilitated through a low-fee vehicle like VOO—remains hard to beat. You’re not trying to outmaneuver the market; you’re trying to participate in American economic growth without letting fees or complexity undermine your returns.

Follow Buffett’s philosophy, not necessarily his recent portfolio adjustments. Build a plan aligned with your own situation, and let time compound your disciplined approach.