Could One Warren Buffett Pick Be the Right Place for 90% of Your Retirement Money?

It’s important to make smart decisions when it comes to your retirement money. Since you can’t live on Social Security alone, you can’t afford to go without supplementary income — and you’ll need to make solid investments to end up with enough of it.

It can be complicated to figure out exactly where you should put your retirement funds so you can earn reasonable returns without taking undue risk. But listening to Warren Buffett could provide you with a recipe for success.

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Buffett recommends this investment mix for most people

Warren Buffet is an active investor, and he provided specific instructions for what he wants the trustee of his estate to do with his money in order to manage it for his wife after he is gone. Buffett wants his trustee to put 90% of his invested funds into an S&P 500 index fund and to put the remaining 10% in Treasury bills.

This investment mix isn’t just the one that Buffett believes is right for his wife. The Oracle of Omaha, as Buffett is sometimes called, has indicated he thinks the S&P 500 is the best investment for the majority of investors.

Why is this investment mix a good one?

Buffett’s recommended investment is a simple one that everyone can make even if they have no investment knowledge at all.

The reality is that many people don’t have the time, knowledge, patience, or interest necessary to research individual companies to invest in. In fact, even many investment professionals who actively manage other people’s investment money can’t beat an S&P 500 index fund over the long term, so it’s even harder for the average person to succeed in this task. That doesn’t mean it’s impossible, of course — people do it. But unless you’re prepared to put in the effort to develop your investing skills, actively choosing stocks isn’t likely to be a successful strategy for you.

Investing in an S&P fund, on the other hand, doesn’t require any effort at all. There are dozens of different funds out there that track the Standard & Poor’s stock market index. These funds invest in the 500 or so large U.S. companies that make up this index. The fees on S&P 500 funds are low, and investors who leave their money in them for the long-term can reasonably expect to earn around 10% average annual returns based on decades of past performance.

When you invest in an S&P fund, you can’t really beat the market since the performance of this financial index is one of the key metrics people actually use to measure how the stock market is doing. But you don’t need to beat the market if you invest consistently over time and leave your money alone. Buffett knows that this is a sound strategy that is all but certain to pay off even for people without investing knowledge, and that’s why he recommends it.

While the S&P 500 is a good place for most of your money, though, Buffett does recommend keeping some outside of equities. In his case, he’s opted for Treasury bonds, but you could also choose a bond fund as well. The key is to have appropriate diversification in your portfolio and to invest at a level you’re comfortable with. If you don’t want to or can’t pick stocks, Buffett’s suggested strategy could be the very best approach.

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