Overview
- Warren Buffett has long advised ordinary investors to use a very low-cost S&P 500 index fund and specifically named Vanguard in his written instructions for trustees.
- The Vanguard S&P 500 ETF (VOO) charges an expense ratio of 0.03%, which keeps annual costs tiny compared with most active funds and supports Buffett’s cost-based rationale.
- VOO has grown to more than $950 billion in assets but is highly concentrated, with the top 10 holdings around 38% of the fund and the top three about 20%.
- The S&P 500 is weighted by market capitalization and overseen by an index committee, which means the largest public companies carry outsized influence over index returns and volatility.
- Investors can use VOO as a low-cost core and add small, targeted 'satellite' positions or alternative weighting strategies if they want to reduce concentration risk or seek more exposure to smaller high-growth firms.