When he dies, Warren Buffett said 90% of his wife's inheritance will go into a single investment. Here's why (and how you can do it too)

In his 2013 letter to Berkshire shareholders, Buffett shed light on the directives he has included in his will.

“One bequest provides that cash will be delivered to a trustee for my wife’s benefit,” he wrote (2). “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.” And now, over 10 years later, the S&P 500 is continuing to weather storm after storm — including the war in Iran.

While Buffett’s strategy is straightforward and doesn't require constant monitoring or active trading, Buffett expressed a significant amount of confidence in it.

Here are a few ways you can take Buffett’s advice and apply it to your own portfolio.

Don’t pick stocks, do this instead

Buffett’s preference for recommending index funds stems from his belief that stock picking is not an optimal strategy for average investors.

At the 2021 shareholders meeting, he stated frankly, “I do not think the average person can pick stocks (3).”

This is where index funds come into play. They can be a passive investment strategy accessible to everyone — even those without Buffett’s wealth.

In fact, even your digital nickels and dimes will suffice. There’s a popular app called Acorns that invests your spare change for you automatically.

All you need to do is sign up and link your cards, which just takes a couple of minutes. Then it’ll round up your recent purchases to the nearest dollar and invest the difference — your spare change — in a diversified portfolio.

This effortless strategy offers a practical and low-barrier entry into the world of investing.

With Acorns, you can invest in a dividend ETF with as little as $5. Even better, if you sign up today. with a reccuring monthly deposit, Acorns will add a $20 bonus to help you begin your investment journey.

It’s worth noting the S&P 500, Buffett's preferred index fund for low-cost investing, surged 24% in 2023. By investing in an S&P 500 index fund, investors get exposure to 500 large companies across various industries.

The last 10%?

Remember, Buffett didn’t advise going all-in on the S&P 500. He also recommended allocating 10% of the cash to short-term government bonds.

Investing in short-term government bonds can be appealing for those seeking lower-risk investments or a stable, relatively predictable source of income. Furthermore, these bonds are more liquid than long-term bonds, making it easier for investors to access their funds without significant penalties or loss in value.

The optimal allocation hinges on one's personal financial situation and the current stage of their investment journey.

But bonds and safe bets are only one part of the typical 60/40 portfolio split. Investing in companies directly rather than an index is, for many, a natural part of growing your wealth — and cultivating your nest egg.

SoFi’s easy-to-use DIY investing platform lets you buy stocks, ETFs and more with no commission fees and no account minimums.

The platform is designed for both beginners and seasoned investors, with real-time investing news, curated content and the data you need to make smart decisions about the stocks that matter most to you.

Plus for a limited time you can get up to $1,000 in stock when you fund a new account.Always have a plan

Ultimately, everyone’s financial situation is unique, characterized by different obligations, goals and risk tolerance.

While the dream of growing our savings alongside the S&P 500 is common, many Americans also face other financial responsibilities such as mortgages and student loans.

Ensuring you have enough money to meet current financial obligations and invest for the future can be a difficult task to tackle on your own.

If you want to ensure you’re maximizing your money, it could pay to speak to a qualified financial advisor.

Research from Vanguard shows that working with a financial advisor can add about 3% to net returns over time. That difference can become substantial. For example, if you started with a $50,000 portfolio, professional guidance could mean more than $1.3 million in additional growth over 30 years, depending on market conditions and your investment strategy.