Top Performing ETF on Robinhood, Recommended by Warren Buffett, Increases 632% Over 15 Years
In a significant endorsement, legendary investor Warren Buffett, also known as the Oracle of Omaha, has recommended the Vanguard S&P 500 ETF (VOO) for everyday investors. This low-cost, broad market index fund offers a simple and effective way to invest in the U.S. stock market, specifically the S&P 500 index.
One of the key reasons for Buffett's endorsement is the ETF's extraordinarily low expense ratio of just 0.03%. This means that almost all of the market returns are retained by investors rather than lost to fees, which is crucial for maximising the power of compounding over time.
The S&P 500 index has historically delivered strong long-term returns, averaging around 10% annually. VOO tracks this index faithfully, making it an ideal vehicle for buy-and-hold investors seeking wealth accumulation through market exposure.
Buffett acknowledges that the vast majority of individual investors are better off simply buying a low-cost index fund like VOO instead of attempting to beat the market through stock picking. VOO provides a diversified basket of 500 of America's largest and most successful companies, reducing the risk associated with picking individual stocks.
The Vanguard S&P 500 ETF has delivered exceptional performance, with a total return of over 244% in the past decade (including dividends) and a compound annual growth rate of about 13%. This strong historical performance further supports Buffett’s recommendation for everyday investors seeking reliable growth.
Online brokerages, such as Robinhood, have become popular among retail investors due to commission-free trades and the ability to buy fractional shares. Notably, the Vanguard S&P 500 ETF (VOO) is the most widely held ETF on Robinhood's platform.
Buffett's investing prowess at Berkshire Hathaway has resulted in a cumulative return of nearly 5,900,000% for his company's Class A shares since he became CEO 60 years ago. Despite not typically offering specific investment advice, Buffett made an exception and recommended the S&P 500 index fund to retail investors in May 2020.
In conclusion, Warren Buffett’s recommendation of the Vanguard S&P 500 ETF is based on its cost efficiency, broad market exposure, simplicity, and strong historical returns, all of which align perfectly with his investment principles of long-term, disciplined investing in fundamentally sound assets.
Technology plays a crucial role in facilitating easy access to the Vanguard S&P 500 ETF for investors, with platforms like Robinhood enabling commission-free trades and the ability to purchase fractional shares.
The Vanguard S&P 500 ETF's strong historical returns of over 244% in the past decade and a compound annual growth rate of about 13% demonstrate the potential profitability of investing in this low-cost index fund.
Warren Buffett, when recommending the S&P 500 index fund, emphasized the ETF's simplicity, broad market exposure, and cost efficiency as key qualities that align with his long-term, disciplined investing principles.
