It has rock-bottom costs and delivers instant income to its shareholders.
Billionaire Warren Buffett is famous for his skill at picking individual stocks. His returns have been phenomenal, trouncing the wider market averages over the past several decades.
But choosing individual stocks like his favorites (such as Apple (NASDAQ: AAPL) and Coca-Cola (NYSE: KO)) is not what Buffett recommends for most investors. Rather, the Oracle of Omaha believes you'd be much better off putting your money in a low-cost fund that seeks to replicate the returns from an index like the S&P 500. That way, your gains will beat the vast majority of professionals on Wall Street, with very little effort on your part.
With that goal in mind, let's look at an exchange-traded fund (ETF) that meets Buffett's criteria. Here's why the Vanguard Dividend Appreciation ETF (VIG -1.20%) deserves a spot in your long-term investment portfolio.
Why Buffett would love this ETF
The Vanguard Dividend Appreciation ETF tracks the performance of a large subset of S&P 500 stocks -- specifically, those that have a record of growing their dividends each year. Buffett would likely love this fund for a few key reasons.
- The fund is passively managed, keeping costs extremely low.
- It owns hundreds of large, established businesses within the S&P 500.
- Most of its holdings pay a growing dividend.
Let's start with the fact that the ETF is a passively managed index fund, meaning it does not employ expensive portfolio managers. That approach results in low costs, with just $6 charged to investors annually per $10,000 invested. Similar funds that use portfolio managers have fees that are many multiples of that rate -- upwards of $79 on average. In Buffett's 2013 letter to Berkshire Hathaway (NYSE: BRK.B) (NYSE: BRK.A) shareholders, he extolled the value of a "very low-cost" index fund, and this one certainly fits that description.
The Vanguard Dividend Appreciation fund is anchored in the S&P 500, with its top holdings including cherished Buffett gems like Apple and Coca-Cola. The financial sector is its biggest concentration, but investors get exposure to just about every other industry through this fund as well. It is run by Vanguard, too, which Buffett has called out as a trustworthy financial brand.
Dividend growth is powerful
Finally, there's the fact that this ETF is focused on dividend payers whose payouts are rising. Buffett has talked up dividends consistently in his annual letter to Berkshire shareholders, including last year when he explained how they are part of the "secret sauce" that's made his portfolio's returns so stellar over the years.
Dividend growth at Coca-Cola, for instance, has lifted Berkshire's annual income from that one holding to $704 million per year from $75 million back when Buffett concluded his purchases of the beverage giant several decades ago. "All Charlie [Munger] and I were required to do was cash co*ke's quarterly dividend checks," Buffett said. co*ke shares are included in this ETF, along with roughly 300 other quality dividend stocks.
Mimic Buffett's approach
Investors can't expect to repeat Buffett's amazing returns going forward, even with the perfect ETF. But you can maximize your chances at strong growth by taking a page out of his investing playbook.
Specifically, buy high-quality companies that have a good track record of increasing their earnings over time. Hold these stocks for many years (or decades), and you've got the ingredients you need to make the most out of your portfolio. The Vanguard Dividend Appreciation ETF is one great financial tool you can use to help you along in that investing journey.
Demitri Kalogeropoulos has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Vanguard Specialized Funds-Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.
FAQs
Which stocks is Warren Buffett buying?
| Company name & symbol | Percent change in share count over last quarter |
|---|
| Chubb Limited (CB) | New |
| Liberty SiriusXM Group — Series A (LSXMA) | 62% |
| Liberty SiriusXM Group — Series C (LSXMK) | 52% |
| Occidental Petroluem Corp. (OXY) | 2% |
May 22, 2024
Berkshire Hathaway is arguably the ultimate forever stock for at least two reasons. First, it is a massive, multinational conglomerate comprised of many smaller businesses across various industries.
What stocks does Warren Buffett say to buy? ›
3 Warren Buffett Stocks to Buy After Berkshire Hathaway's Just-Released 13F Filing
- Charter Communications Inc Class A. (CHTR)
- Berkshire Hathaway Inc Class A. (BRK.A)
- Occidental Petroleum Corp. (OXY)
- HP Inc. (HPQ)
- Liberty SiriusXM Group Registered Shs Series -A- Sirius XM Group. (LSXMA)
CEO Warren Buffett is widely considered a legend on Wall Street, and for good reason. The conglomerate's portfolio has substantially outperformed the benchmark S&P 500 since Buffett became CEO in 1965.
Is brkb stock a buy? ›
With its 4-star rating, we believe Berkshire Hathaway's stock is undervalued compared with our long-term fair value estimate of $427 per Class B share, which is equivalent to 1.45 times our estimate of the firm's book value per share at the end of 2024 and 1.35 times for 2025.
What is Warren Buffett's number one stock? ›
Apple is Berkshire's largest public stock holding by far. Berkshire's $151 billion Apple stake is roughly four times larger than its second-largest holding. Buffett first bought Apple shares in the first quarter of 2016, and Apple's stock price is up more than 500% since the beginning of 2016.
What does Bill Gates invest in? ›
Bill Gates Portfolio: 7 Best Stocks to Buy Now
| STOCK | % OF PORTFOLIO | MARKET VALUE OF SHARES |
|---|
| Microsoft Corp. (MSFT) | 33.5% | $15.4 billion |
| Waste Management Inc. (WM) | 16.4% | $7.5 billion |
| Berkshire Hathaway Inc. (BRK.B) | 15.9% | $7.3 billion |
| Canadian National Railway Co. (CNI) | 15.8% | $7.2 billion |
3 more rowsMay 22, 2024
The 15 Most Consistent Stocks of the Last 50 Years
- Berkshire Hathaway (BRK. ...
- American Express (AXP) ...
- Lockheed Martin (LMT) ...
- Coca-Cola (KO) ...
- Walmart (WMT) ...
- JPMorgan Chase (JPM) ...
- Microsoft (MSFT) ...
- The Home Depot (HD) The Home Depot has raised its dividend for 14 years — and counting.
3 "Magnificent Seven" Stocks Billionaires Are Selling, and the 1 They Can't Stop Buying
- Microsoft (NASDAQ: MSFT)
- Apple (NASDAQ: AAPL)
- Nvidia (NASDAQ: NVDA)
- Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG)
- Amazon (NASDAQ: AMZN)
- Meta Platforms (NASDAQ: META)
- Tesla (NASDAQ: TSLA)
7 of the Best Long-Term Stocks to Buy
| Long-Term Stock | Forward Dividend Yield |
|---|
| Dover Corp. (DOV) | 1.1% |
| Abbott Laboratories (ABT) | 2.1% |
| Chubb Ltd. (CB) | 1.4% |
| Chevron Corp. (CVX) | 4.2% |
3 more rowsMay 24, 2024
So, why does Buffett only recommend index funds? Because it's the best possible choice, "on an expectancy basis," as he put it. In other words, buying an index fund has a higher expected return than buying any single individual stock or actively managed mutual fund.
What stocks does Elon Musk invest in? ›
Tesla and SpaceX have been Musk's best investments to date. But he's also done quite well with The Boring Company, which provides infrastructure and underground tunnel construction services. Musk invested around $100 million of his own money to get the company off the ground, as CNBC also reported.
What is the secret stock of Berkshire Hathaway? ›
Since last year, Berkshire Hathaway has accumulated a position in an unknown financial company. Its first-quarter Securities and Exchange Commission filing revealed Chubb as the mystery stock. Chubb is one of the largest insurers in the world and fits in with Buffett's other investments.
What ETF has outperformed the S&P 500? ›
One strategy, the T. Rowe Price Blue Chip Growth ETF (TCHP), has done just that. The active ETF has proved itself as one of the top active ETFs in 2024, outperforming the S&P 500 in 2023 and so far year-to-date (YTD). TCHP has returned 11.7% YTD per YCharts, compared to 7.4% for the S&P 500.
Which is better, Berkshire Hathaway or S&P 500? ›
Historical Performance
Berkshire Hathaway: Has historically outperformed the S&P 500 over the long term under Warren Buffett's leadership. However, past performance doesn't guarantee future results.
What is Warren Buffett investing in now? ›
Top Warren Buffett Stocks By Size
Apple (AAPL), 789.4 million. Coca-Cola (KO), 400 million. Kraft Heinz (KHC), 325.6 million. Occidental Petroleum (OXY), 248 million.
Should you buy Berkshire A or B? ›
Key Points. Berkshire created two share classes in 1996 to make investing more accessible. Both share classes offer essentially the same exposure to the company's success. Most investors are better off sticking with Class B shares for their flexibility and affordability.
Is amzn a buy right now? ›
Amazon has 18.63% upside potential, based on the analysts' average price target. Is AMZN a Buy, Sell or Hold? Amazon has a consensus rating of Strong Buy which is based on 42 buy ratings, 0 hold ratings and 0 sell ratings.
How high will BRKB go? ›
The average price target for Berkshire Hathaway B is $470.67. This is based on 3 Wall Streets Analysts 12-month price targets, issued in the past 3 months. The highest analyst price target is $490.00 ,the lowest forecast is $450.00. The average price target represents 13.77% Increase from the current price of $413.72.
What secret stock is Berkshire Hathaway buying? ›
Warren Buffett's 'Mystery Stock' Bet Is Chubb
Reports of confidential stock purchases by Berkshire Hathaway have circulated since late last year. Those mysterious purchases, made in Q3 and Q4 of 2023, became known through financial disclosures. Chubb joins several financial stocks in Berkshire's equity portfolio.
The current portfolio value is calculated to be $331.68 Bil. The turnover rate is 1%. In Warren Buffett's current portfolio as of 2024-03-31, the top 5 holdings are Apple Inc (AAPL), Bank of America Corp (BAC), American Express Co (AXP), Coca-Cola Co (KO), Chevron Corp (CVX), not including call and put options.
Is Chevron a good stock to buy? ›
Chevron Corp has a consensus rating of Strong Buy which is based on 12 buy ratings, 3 hold ratings and 0 sell ratings. The average price target for Chevron Corp is $187.20. This is based on 15 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
Is Siri a good stock to buy? ›
Sirius XM Holdings Inc has a consensus rating of Hold which is based on 4 buy ratings, 5 hold ratings and 2 sell ratings. The average price target for Sirius XM Holdings Inc is $4.06. This is based on 11 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
