The Greatest Investor In The World Says Buy S&P500, Would You Buy It?

Published date: 11/03/2019
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The Oracle of Omaha, Warren Buffett. Considered one of the greatest investors of all time. He has built a legacy and a net worth some would shiver at. He invests through value investing and the rather simple, buy low and sell high philosophy. The oracles most used investing wisdom, “Buy Businesses, Not Stocks”. He says, treat the stocks you buy like businesses. When you feel like a business owner you treat the stock differently, you do not care about 1 or 6 months price fluctuations, instead, you look at the business and company itself, with a much longer-term view towards your holdings. 

So what is this great piece of advice to other investors? Buy low cost US index funds over time. A quote Buffett said last week “I would buy the S&P500 in a second”. This means buying the market at any given time for a prolonged period. Whether the market is up or down is neither here nor there, buying the market every month is called “Dollar Cost Averaging”. The argument to his case is that American businesses overtime will be just fine. Yes, there will be down periods and up periods, but over time this will even out and companies will continue to evolve. Meaning the S&P500 will track higher overtime, so if you're going to be buying the market and dollar cost averaging in the years to come, you will be just fine. 

Let's put some numbers to this “Strategy”. 

Over the past 90 years, the S&P500 index has averaged 9.8% annually. 

Adjusted inflation returns average out around 7% annually.

2017 = Annual returns = 19.7%

2018 = Annual returns = -6.2% 

The evidence is insurmountable, the benchmark of investing is to compare your results to the S&P500 on an annual or 3-5 year basis. Below this benchmark and you have had a bad year, above this benchmark and it is considered a good year. Taking this data on a static principle would not be advised, as the results can be a little skewed. During the lifetime of the S&P500, there have been multiple major bull and bear markets. The worst year on record was recorded in 2008-2009 a -43% decline in the index, the best return was recorded in 1983 and that was a staggering 97%. This is why Buffett advises to buy the market over time and not to worry about what the market does, because over time the market will evolve and continue to grow. 

So there we have it, the greatest investor of all time says, buy low cost US index funds. The real question is, have you?

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Comments

  • The Greatest Investor In The World Says Buy S&P500, Would You Buy It?
    John says:
    12/03/2019

    Not every body has time on their side. This what they should be teaching at High school. How to value businesses.

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