You won't find a lot about it because Warren Buffett hasn't said or explained much about it. His statements are very short and un-elaborated. Warren Buffett fans are convinced they know what he's thinking, but I can only go by what he's said. As far as I know he's never given an explanation any more detailed than in the 2013 Letter to Shareholders:
Here are some things he didn't say.
a) Does he mean specifically an S&P 500 index fund, and not a total stock market index fund?
b) Is he saying to avoid small-caps?
c) Is he saying to invest 100% in US stocks, none in international stocks?
d) Is he saying individual short-term nominal government bonds, not a short-term government bond fund?
e) Does he mean nominal bonds and not TIPS?
f) Who, exactly, is the set of investors for whom he recommends this portfolio? Is he saying I should be investing 90% in stocks if I don't think I have the risk tolerance for 90% stocks?
We don't know. He hasn't said. He could say if he wanted to. He could write investment advice books like John C. Bogle did. He doesn't. Beyond what he said, it's all guesswork and surmises.
My guess is that he is trying for a portfolio that is like an "elevator pitch"--it can be described in a couple of sentences, it is easy to remember, requires no extra explanation, and is good enough. For example, I assume the only reason he calls out an S&P 500 index fund, explicitly, is that there are lots of them, they are essentially the same, and he doesn't need to make a longer explanation--even as short as "an S&P 500 or a total market index fund." And doesn't need to talk about which one and how to decide.
That's it. That's what he said.My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) 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. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.
Here are some things he didn't say.
a) Does he mean specifically an S&P 500 index fund, and not a total stock market index fund?
b) Is he saying to avoid small-caps?
c) Is he saying to invest 100% in US stocks, none in international stocks?
d) Is he saying individual short-term nominal government bonds, not a short-term government bond fund?
e) Does he mean nominal bonds and not TIPS?
f) Who, exactly, is the set of investors for whom he recommends this portfolio? Is he saying I should be investing 90% in stocks if I don't think I have the risk tolerance for 90% stocks?
We don't know. He hasn't said. He could say if he wanted to. He could write investment advice books like John C. Bogle did. He doesn't. Beyond what he said, it's all guesswork and surmises.
My guess is that he is trying for a portfolio that is like an "elevator pitch"--it can be described in a couple of sentences, it is easy to remember, requires no extra explanation, and is good enough. For example, I assume the only reason he calls out an S&P 500 index fund, explicitly, is that there are lots of them, they are essentially the same, and he doesn't need to make a longer explanation--even as short as "an S&P 500 or a total market index fund." And doesn't need to talk about which one and how to decide.
Statistics: Posted by nisiprius — Wed Apr 24, 2024 6:11 pm — Replies 11 — Views 670