Why Warren Buffett Told His Wife to Buy This One Fund — And Why You Can Too

🕑 15 min read  ·  ✅ Fact-checked  ·  📋 Sources: IRS, CFPB, SEC

Warren Buffett, often described as the most successful active investor in history, has built his fortune over six decades by carefully picking individual stocks and entire businesses. Berkshire Hathaway, the holding company he chairs, owns large stakes in dozens of public companies, plus wholly-owned subsidiaries from insurance to railroads. His net worth, derived almost entirely from active investment decisions, has placed him among the wealthiest people on earth for decades.

And yet, when Buffett tells the world how his own wife’s inheritance should be invested after his death, he does not recommend stock picking, hedge funds, or sophisticated strategies. He recommends one specific low-cost index fund. The instructions are written in his 2013 letter to Berkshire Hathaway shareholders, available free on the Berkshire Hathaway investor website at berkshirehathaway.com.

The implications for everyday investors — especially immigrant families building wealth without the benefit of inherited fortunes or insider Wall Street connections — could not be more important. If the man whose entire career has been built on outperforming the market believes the right strategy for his own family is a low-cost index fund, the message for the rest of us is unmistakable.

The exact instructions Buffett left for his wife

In his 2013 Berkshire Hathaway annual letter, on page 20, Buffett wrote about the trust that will hold money for his wife after his death. The full text is publicly available, but the key passage reads as follows:

“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.”

That is it. Two assets. Ninety percent in a low-cost S&P 500 index fund. Ten percent in short-term government bonds. No active management. No sophisticated tax optimization. No alternative investments. The kind of portfolio that any immigrant with an ITIN and $200 to invest could replicate at a discount broker this afternoon.

Buffett returned to this topic in his 2016 letter, dedicating an entire section to the case for index investing. He recounted his famous $1 million bet — which he won — against a hedge fund firm called Protégé Partners. Buffett bet that over ten years, a low-cost S&P 500 index fund would outperform a basket of five funds-of-funds selected by Protégé. Over the ten years from 2008 to 2017, the S&P 500 returned an average of 8.5 percent annually. The basket of hedge funds returned an average of 2.96 percent annually. The hedge funds also charged enormous fees, further widening the gap.

This was not a fluke. It was the predictable result of high fees compounding against the natural return of the market. Buffett donated the entire $1 million winnings to Girls Inc. of Omaha. The point was not the money; the point was the public proof that the index fund strategy is statistically superior for ordinary investors.

What the 90/10 portfolio actually is

Buffett’s recommended portfolio has two components, and understanding both is essential for replicating it correctly.

The 90 percent S&P 500 index fund provides the growth engine. The S&P 500 contains the 500 largest publicly traded U.S. companies and has historically returned approximately 10 percent annually nominal (about 7 percent after inflation) over long periods. By concentrating 90 percent of the portfolio in this single asset, the investor captures the bulk of long-term U.S. equity returns. The “very low-cost” qualifier matters because high-fee versions of the same fund (some financial advisors push expensive “wrapped” versions of essentially the same index) can erode returns substantially.

The specific fund Buffett mentions, Vanguard’s S&P 500 fund, is available in two forms:

VOO — the ETF version. Expense ratio 0.03 percent. Tradable like a stock during market hours. Tax-efficient. Available at all major brokers including Schwab, Fidelity, and Interactive Brokers.

VFIAX — the mutual fund version (Vanguard 500 Index Fund Admiral Shares). Expense ratio 0.04 percent. Slightly less tradable (settles end of day). Functionally identical performance.

For most immigrant investors, VOO is the simpler choice because it can be bought as a fractional share at any major broker. VFIAX requires a $3,000 minimum investment at Vanguard (or zero minimum if held through certain Vanguard accounts).

The 10 percent short-term government bonds provide stability and liquidity. Government bonds are the safest financial instrument available — they are backed by the full taxing authority of the U.S. federal government. Short-term bonds (maturities of one to three years) have minimal interest rate risk compared with long-term bonds and provide a place for the portfolio to weather equity market downturns without forced selling.

Specific funds that fit this purpose:

SHY — iShares 1-3 Year Treasury Bond ETF. Expense ratio 0.15 percent. Holds U.S. Treasury bonds maturing in one to three years.

VGSH — Vanguard Short-Term Treasury ETF. Expense ratio 0.04 percent. Similar exposure, lower cost.

BIL — SPDR Bloomberg 1-3 Month T-Bill ETF. Expense ratio 0.14 percent. Even shorter duration, more cash-like.

For investors who want maximum simplicity, even a high-yield savings account or U.S. Treasury bills bought directly at TreasuryDirect.gov can serve the same purpose. The point is to have stable, liquid assets that do not move with the stock market.

Why this works so well

The portfolio’s elegance comes from how its two halves complement each other. The 90 percent equity allocation provides the long-term growth that builds wealth over decades. The 10 percent bond allocation provides the psychological and practical stability that lets investors stay the course during market crashes.

During a typical bull market year, the equity portion grows 10 to 25 percent while the bond portion grows 2 to 4 percent. Total return is dominated by equities, which is exactly what you want during periods of growth.

During a market crash — like 2008, when the S&P 500 fell 37 percent — the equity portion drops sharply while the bond portion remains stable or rises slightly. A $100,000 portfolio in the 90/10 allocation would have lost approximately $33,000 in 2008, painful but recoverable. A 100 percent equity portfolio would have lost $37,000, also recoverable but more painful. The 10 percent in bonds did three things: it cushioned the absolute loss, it provided liquid funds that could be redeployed into stocks at low prices, and — most importantly — it gave the investor a small psychological anchor of stability that made it easier to stay invested rather than panic.

This last benefit is impossible to measure but enormous in practice. The most expensive mistake an investor can make is selling during a downturn. Even a small bond allocation, by making the portfolio feel less wild during volatility, materially reduces the probability of that mistake.

How an immigrant family can replicate Buffett’s exact strategy this week

The instructions Buffett wrote for his wife’s trust are available to any immigrant with a brokerage account. The replication is mechanical and fast.

Step 1. Open a brokerage account if you do not have one. Schwab, Fidelity, Interactive Brokers, Webull, and Public.com all accept ITIN holders and have zero account minimums.

Step 2. Determine your total amount to invest. Could be $500, $5,000, or $50,000 — the strategy works at any scale.

Step 3. Calculate 90 percent of that total and 10 percent of that total. For $1,000, that means $900 and $100. For $10,000, that means $9,000 and $1,000.

Step 4. Buy the 90 percent allocation. Search for ticker VOO. Buy fractional shares for the full $900 (or whatever 90 percent of your amount is). Most brokers allow this with a single click. Done.

Step 5. Buy the 10 percent allocation. Search for ticker SHY, VGSH, or BIL (any of the three works). Buy the remaining $100 (or 10 percent of your amount). Done.

Step 6. Set up automatic monthly contributions. Schwab, Fidelity, and M1 Finance can all be configured to automatically purchase the same allocation each month from your linked bank account. With M1 Finance, the automation is particularly clean — you define the pie (90 percent VOO, 10 percent SHY), set the monthly contribution, and the platform handles all the math.

Step 7. Forget the account exists. Open it once a month to confirm deposits happened. Open it once a year to rebalance (sell a little of whichever asset has grown more, buy a little of whichever has grown less, to return to 90/10).

That is the complete strategy. It will take less than thirty minutes to set up. It will require less than thirty minutes per year to maintain. And it will outperform most professional investment managers over twenty-year horizons.

Adjustments to the strategy for different ages and situations

Buffett’s exact 90/10 allocation is aggressive for some investors. The original recommendation was written in the context of a multi-million dollar trust that would never need to be liquidated for living expenses. Most individuals do not have that luxury.

For investors in their 20s and 30s with very long horizons, even 100 percent equities (effectively dropping the 10 percent bond allocation) can be appropriate, because the time horizon allows full recovery from any market downturn. The trade-off is more emotional volatility.

For investors in their 40s and 50s, a slightly more conservative allocation makes sense — perhaps 75/25 or 70/30. The bond portion grows as retirement approaches, providing more stability and reducing the impact of poorly-timed market drops near retirement.

For investors in or near retirement, a much higher bond allocation is standard — often 50/50 or even 40/60. The goal shifts from maximum growth to preserving wealth and generating income, and the higher bond allocation reduces sequence-of-returns risk (the danger of a market crash early in retirement permanently impairing the portfolio).

The key point is that Buffett’s 90/10 is one specific recommendation for one specific situation (a trust with a long horizon and no urgent need for liquidity). The general lesson — keep the strategy simple, use index funds, hold for the long term — applies universally even if the exact ratios vary.

What Buffett does not recommend (and why it matters)

Equally instructive is what Buffett’s recommended portfolio does not include. He does not recommend:

Individual stock picking. Even though Buffett built his fortune through stock picking, he does not recommend it to his wife. The asymmetry matters. Buffett picks stocks because he has dedicated his life to the discipline, has access to information ordinary investors do not, and operates within a structure (Berkshire Hathaway) that allows extremely long holding periods and concentrated positions. The typical individual investor has none of these advantages.

Hedge funds. Buffett’s $1 million bet was explicitly designed to demonstrate that hedge funds, despite their reputation for sophistication, underperform simple index funds after fees. He does not recommend them under any circumstances for ordinary investors.

Active mutual funds. Same logic as hedge funds. The fees compound against the manager, and the manager rarely outperforms by enough to overcome the fees.

Cryptocurrency. Buffett has been publicly skeptical of cryptocurrency for years, describing Bitcoin as “rat poison squared” in 2018. While reasonable people can disagree about the long-term value of crypto, it is notable that the world’s most successful investor has chosen not to include any crypto in his recommended portfolio for his wife.

International stocks. This is somewhat controversial among other investors who argue for more global diversification. Buffett’s recommendation is U.S.-centric, partly because of the strength and breadth of the U.S. economy and partly because of his familiarity with U.S. markets. Many financial planners recommend adding international exposure (10-30 percent) for broader diversification. Both approaches have merit.

Real estate (other than primary residence). Buffett does not advise his wife to allocate any of the trust to real estate investment trusts (REITs) or direct property. Real estate can be a fine investment, but it is not necessary for a simple wealth-building strategy.

Three Buffett-inspired allocations for different life stages

Buffett’s 90/10 is a single recommendation for a single situation. Real-life immigrant investors fall into many different stages and circumstances, and the same underlying philosophy — index funds at low cost, held for the long term — can be expressed through several variations of the allocation. Below are three practical adaptations.

The 100/0 starter portfolio (ages 22-35). For young immigrant investors with 25+ years to retirement and limited assets to lose, the bond allocation arguably adds little value. The portfolio: 100 percent in a broad U.S. index fund (VOO or VTI). The case is that volatility is irrelevant when the holding period is long enough, and bond returns at these stages dilute the powerful compounding of equities. The downside is more emotional volatility during downturns, which is the main reason the 90/10 remains the more common starting recommendation for most people.

The 80/20 mainstream portfolio (ages 35-50). A small bond allocation begins to make sense as the portfolio grows and as the time horizon shortens. The standard mainstream portfolio: 80 percent broad U.S. equities, 20 percent intermediate-term bond fund (such as BND or AGG). This provides meaningful stability during downturns while preserving most of the equity growth engine. Many financial planners consider this the default for working-age investors with 15-30 years to retirement.

The 60/40 pre-retirement portfolio (ages 55+). As retirement approaches, the bond allocation increases substantially to reduce the impact of a poorly-timed market downturn. The classic 60/40 portfolio — 60 percent equities, 40 percent bonds — has been the bedrock of pension fund management for decades. Buffett himself acknowledges that for those closer to retirement, more bonds make sense. The portfolio’s expected return is lower but its downside in any single year is also much smaller.

The trade-off across all three is the same: more equities means higher expected return and higher volatility; more bonds means lower expected return and lower volatility. The right point on the spectrum depends on time horizon, income stability, and emotional tolerance for volatility, not on any objective “correct” answer.

Why Buffett specifically named Vanguard

Buffett’s specific mention of Vanguard in his 2013 letter was not accidental. Vanguard pioneered the low-cost index fund — its founder John Bogle launched the first retail index fund in 1976. Vanguard’s unique structure (the funds are owned by the investors themselves, not by an outside corporation) eliminates the profit motive that drives most mutual fund companies to charge higher fees.

This structural advantage matters in practice. Vanguard’s expense ratios have consistently been among the lowest in the industry, often setting the floor that competitors must match. As of 2026, Vanguard’s S&P 500 fund (VOO) charges 0.03 percent annually, while Schwab’s equivalent (SCHB or SWPPX) and BlackRock’s (IVV) charge 0.03 percent as well, and Fidelity’s competitor (FXAIX) charges 0.015 percent. The competitive race to zero benefits investors at every firm, and Vanguard is largely responsible for driving it.

Buffett’s recommendation of Vanguard specifically is not a slight to other low-cost providers. Any of the major index fund families (Vanguard, Schwab, Fidelity, BlackRock/iShares) produce essentially identical long-term results when their expense ratios are similar. The bigger point is to use one of them rather than higher-cost alternatives.

The discipline that turns Buffett’s advice into wealth

Replicating Buffett’s portfolio is the easy part. Maintaining it through a working career is harder. Most investors who initially follow this advice eventually drift away from it during difficult market periods or when something more exciting captures attention. The drift is what destroys returns.

The discipline required has three components. First, the discipline to not check the account frequently. Daily checking creates emotional reactions to random noise. Monthly checking is sufficient. Quarterly is even better. Second, the discipline to not react to financial media. The financial press is structurally biased toward suggesting trades, because trades drive ad revenue and viewership. A long-term index investor has no reason to engage with this content. Third, the discipline to not respond to friends, family, or coworkers describing the “amazing returns” they got on some speculative bet. Survivorship bias means you mostly hear about wins, not losses. The same friends do not announce when their crypto position drops 80 percent or when their stock tip goes to zero.

Buffett himself, when asked what investors should do during volatile markets, has consistently given the same advice: “Do not watch the market closely. The money is made in investments by investing, and by owning good companies for long periods of time.” The Buffett-recommended portfolio is built precisely so that this advice can be followed without thought — you own the whole market via the index fund, so there is nothing to actively manage and nothing to worry about.

Frequently asked questions

Can an ITIN holder buy VOO and SHY exactly as Buffett describes?

Yes. Both VOO and SHY are ordinary U.S. exchange-traded funds available at any major U.S. broker including those that accept ITIN holders (Schwab, Fidelity, Interactive Brokers, Webull, Public.com). The purchase process is identical for ITIN and SSN holders.

Is the 90/10 portfolio appropriate for someone who needs the money in 5 years?

No. The 90/10 portfolio is designed for long-term horizons (15+ years). If the money is needed within 5 years, the equity allocation should be much lower — perhaps 30 to 50 percent — to reduce the chance of a downturn happening right when the money is needed. For very short horizons, near 100 percent in high-yield savings or short-term Treasuries is appropriate.

Should I add international stocks to Buffett’s recommendation?

This is a reasonable adjustment. A modified version might be 70 percent VTI or VOO (U.S. stocks), 20 percent VXUS (international stocks), 10 percent SHY (bonds). Both the original 90/10 and this modified 70/20/10 are defensible. The decision matters less than the discipline to stick with whichever you choose.

How often should I rebalance the 90/10 portfolio?

Once a year is enough. Some investors rebalance when the equity allocation drifts more than 5 percentage points from the target (e.g., from 90 percent to 85 percent or 95 percent). More frequent rebalancing adds taxes and transaction friction with little benefit.

What happens if I deviate from this strategy and try to pick stocks?

The data is clear: most investors who attempt active stock picking underperform a simple index strategy over long periods. There are exceptions, but they are rare and not reliably predictable in advance. The most honest answer is that deviating costs the average investor 1 to 3 percentage points per year of returns, which compounds enormously over a 30-year horizon.

Conclusion: take the advice that the master gives his own family

Most financial advice carries an inherent conflict of interest. Advisors recommend strategies that pay their fees. Brokerage firms recommend products that generate trading commissions. Financial media recommends the trades that produce engaging stories. Almost no source of investment advice is fully aligned with the interests of the person receiving it.

Warren Buffett’s advice to his wife is the rare exception. He has no commercial interest in promoting the Vanguard S&P 500 fund. He earns nothing from it. He has every reason to want the trust that supports his wife to perform as well as possible. And his recommendation is, almost embarrassingly, simple. Ninety percent in a low-cost S&P 500 index fund. Ten percent in short-term government bonds.

Take that advice. Replicate it in your own brokerage account this week. The cost is essentially zero. The time required is essentially zero. The expected outcome, over a working career, is wealth that compounds quietly without requiring your attention or your worry. The greatest active investor of the past century has handed you, free of charge, the playbook for your own family’s financial future. The only question that remains is whether you will use it.

For step-by-step instructions on opening a brokerage account with an ITIN, see our broker comparison and individual broker guides. For more on building a complete portfolio around index funds, see our three-fund portfolio guide for immigrants.

“I asked my advisor to just put my money in the S&P 500. She tried to talk me into a ‘diversified managed fund’ with a 1.5% annual fee. I said no. That decision is worth roughly $4,000 more in my account today.”
— Sofia R., Colombia → Chicago — investing since 2017