Yahoo Finanzas Warren Buffett Reveals The Instructions In His Will To Invest 90% Of Wife's Inheritance — 'My Widow Will Not Be An Expert On Stocks'
Legendary investor Warren Buffett offered straightforward investment advice during an appearance, on CNBC's "Squawk Box," which followed the release of Berkshire Hathaway Inc.'s annual shareholder letter. Buffett's advice centered on an investment strategy for his wife, Astrid, guided by the instructions he had laid out in his will.
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In the interview, he said the Berkshire shares would go to philanthropy. Part of the cash would go directly to his wife and part to a trustee. He told the trustee to put 10% of the cash in short-term government bonds and 90% in a low-cost S&P 500 index fund.
CNBC's Becky Quick highlighted that it was the first time Buffett had publicly discussed the details. Buffett said, "I laid out what I thought the average person who is not an expert on stocks should do. And my widow will not be an expert on stocks. I want to be sure she gets a decent result."
The strategy Buffett outlined is not just for his family but applies to any investor seeking reliable returns without the need for expert knowledge. He advised using the 10% allocation in short-term government bonds as a buffer during market downturns, allowing for withdrawals without needing to sell stocks at potentially low prices.
The S&P 500 index encompasses a broad range of stocks, including major companies such as Apple Inc., Microsoft Corp. and Google parent Alphabet Inc. The appeal of index funds lies in their passive investment strategy, which involves low turnover rates. This efficiency helps to keep fees and taxes low.
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The performance of index funds is tied to the results of the companies in them, providing a balanced investment as gains in some stocks can offset losses in others. For instance, if one company's stock in the index rises by 3% and another falls by 2%, the net increase would be 1%, thereby offering a simplified and effective approach to investing in the broader market.
Buffett has long advocated for the benefits of index funds, highlighting his views as early as the 1993 annual shareholder letter.
"By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals," he wrote in the letter. "Paradoxically, when ‘dumb' money acknowledges its limitations, it ceases to be dumb."
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Buffett's endorsement of index funds continued in the 2016 shareholder letter, where he shared insights gained from decades of giving investment advice. He consistently recommended a low-cost S&P 500 index fund, observing that wealthy people often believe their money should buy them access to superior investment options.
Buffett criticized this mindset, noting that the financial "elites" struggle to accept that a product beneficial to both small and large investors could be the optimal choice. He explained that this reluctance often leads to significant financial waste, estimating that the quest for exclusive investment advice has cost the elite over $100 billion in the past decade.
Buffett’s insight provides a foundation for long-term investing, but the financial world can still feel complex, especially for beginners. The ever-changing market and the vast array of options can be overwhelming, which is why consulting a qualified financial adviser is beneficial. They can tailor Buffett’s core principles — like low-cost index funds and diversification — to your unique circumstances and risk tolerance. Even the savviest investors benefit from a second set of eyes.
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This article Warren Buffett Reveals The Instructions In His Will To Invest 90% Of Wife's Inheritance — 'My Widow Will Not Be An Expert On Stocks' originally appeared on Benzinga.com
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