Two Vanguard ETFs That Align With Warren Buffett's Core Investment Philosophy

What Warren Buffett’s Investment Strategy Actually Teaches Us

Though Warren Buffett has stepped down from his role leading Berkshire Hathaway, his approach to wealth building remains one of the most instructive frameworks for everyday investors. The investments held by Berkshire—including significant positions in Apple, American Express, Bank of America, Coca-Cola, and Chevron—reveal a consistent pattern: Buffett gravitates toward companies with strong cash generation, resilient balance sheets, defensible competitive advantages, and reasonable valuations.

His philosophy centers on a deceptively simple principle: avoid unnecessary complexity, minimize costs, and think in terms of decades rather than quarters. While Buffett himself has never been a traditional exchange-traded fund (ETF) investor, his public statements and actions provide clear signals about which ETF-based approach would align with his thinking.

The Core Strategy: 90% Growth, 10% Stability

In 2013, during a Berkshire Hathaway shareholder letter, Buffett outlined exactly how he intends to structure the financial legacy left to his wife:

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.)

This 90/10 framework represents the distilled essence of Buffett’s investment wisdom. The 90% allocation to broad market exposure captures long-term equity returns without requiring active stock-picking expertise. The 10% position in short-term government securities serves multiple purposes: it provides stability during market downturns, creates psychological comfort for risk-averse investors, and maintains dry powder for deploying capital when opportunities emerge at compelling valuations.

This wasn’t casual commentary. It was Buffett’s explicit recommendation for how he’d deploy capital on behalf of someone he cares about most.

The First Half: Why the Vanguard S&P 500 ETF Works

The Vanguard S&P 500 ETF (VOO) represents the 90% equity portion of this framework. It tracks the 500 largest U.S. companies, offering instant diversification across sectors and minimizing stock-picking risk. Buffett’s recommendation carried implicit endorsement of this particular product because it embodies his core principles: rock-bottom expense ratio, transparency, and elimination of unnecessary middleman costs.

By holding 500 companies rather than concentrating on a handful of stocks, investors capture the compounding power of American capitalism without betting their entire portfolio on management decisions or market cycles specific to individual enterprises.

Completing the Picture: The Treasury Bill Solution

The second component—the 10% allocation to short-term fixed income—requires a vehicle that embodies the same cost-consciousness and simplicity. The Vanguard 0-3 Month Treasury Bill ETF (VBIL) fulfills this role perfectly.

VBIL tracks Treasury securities with maturities between zero and three months, offering several strategic advantages. The current yield sits at 3.67% as of January 2026, paired with an ultra-lean 0.07% expense ratio. For context, this cost structure ranks among the cheapest available options in its category—precisely the kind of frugal approach Buffett consistently recommends.

What makes this pairing particularly elegant is the return profile. While 3.67% doesn’t match the growth potential of equities over extended periods, it represents genuine risk-free income above current inflation rates. In earlier decades, Treasury bills were essentially return-free positions held only for psychological comfort. Today’s yield environment transforms them into productive components of a diversified strategy.

Why This Two-Fund Approach Mirrors Buffett’s Broader Thinking

Berkshire Hathaway’s balance sheet regularly maintains substantial cash reserves—sometimes exceeding $150 billion. This isn’t indecision or fear. It reflects Buffett’s conviction that maintaining optionality matters. When market valuations compress due to panic or structural change, having reserves available allows deployment at attractive prices.

The 90/10 structure replicates this logic at an individual investor scale. The majority allocation (90%) compounds over time through market participation. The minority allocation (10%) preserves flexibility and reduces sequence-of-returns risk during retirement. Together, they create a framework that works across market environments without requiring market-timing ability or constant rebalancing decisions.

The Track Record and What It Means

The underlying logic here has proven durable. The Vanguard S&P 500 ETF and Treasury positions have delivered cumulative returns that outpace actively managed alternatives by significant margins. Over extended periods, the mathematical advantage of low-cost index investing compounds into life-altering wealth differences.

Consider that even among carefully selected stocks by professional analysts, the historical average return advantage is 958% versus 196% for the S&P 500—not because the index always outperforms, but because consistent exposure to broad-based growth, coupled with minimal fee drag, creates superior long-term outcomes.

The Implementation Question

The elegance of Buffett’s recommendation lies in its implementability. An investor doesn’t need sophisticated financial models, real-time market data, or sophisticated risk management frameworks. They need two ETFs, a dollar-cost averaging discipline, and patience.

The combination of VOO for equity exposure and VBIL for short-term fixed income creates a complete portfolio. It’s boring. It’s mechanical. It’s precisely why it works. The psychological burden of constant decision-making disappears, replaced by a systematic approach aligned with Buffett’s decades of proven success.

For investors seeking a straightforward framework that echoes Buffett’s investment principles without requiring direct stock selection or active trading, this two-ETF combination deserves serious consideration.