Day 20: Copying the Best Investor in The World

Copying the Best Investor in the World

Investing isn’t easy or straightforward, and definitely not something you can learn to do by reading one sentence – except this next one.

“Put 90% of your wealth in an index fund that tracks the S&P 500 and the remaining 10% in Treasuries”

Do you think you can do that? Perhaps not immediately, if you don’t know how to invest in an index fund, or what the S&P 500 is, let alone whether you can buy Treasuries, but that’s really only three things to learn. You can do that. It’s probably the simplest investment plan of all time.

It’s also the real investment plan of the best investor who has ever lived, Warren Buffett. Buffett has transformed the nature of investing, popularising fundamental analysis while publishing reams of his investment thoughts as part of his company Berkshire Hathaway’s annual report.

Given this, it feels a little strange that he has published such a simple and straightforward investment plan that doesn’t really follow any of the ways he has discussed investing during his career.

That’s because the plan isn’t for him – it’s for his loved ones once he dies

You see, Buffett knows better than anyone what makes a good investor, and he probably knows how to identify them too – but he doesn’t think anyone else does. Or at least, he doesn’t trust anyone to select investors for his estate after his death. Instead, he thinks his family will be much better off keeping nearly all of their money in an index fund on the S&P 500, which automatically selects the 500 biggest public companies in the US and charges a very low fee to do that, compared to managers that might charge a very high fee to not do much better.

If it makes sense for Buffett’s last will and testament, it makes sense for your first investment fund.

You might want to add to it over time. You might want to buy some property, or some individual stocks, but 90% in a big index fund should be the foundation of your portfolio.

But start by remembering that one sentence, and you will be making a very sensible, and very understandable first investment decision.