Warren Buffett is not only one of the savviest investors of our time, but also one of the wealthiest. The Oracle of Omaha now has an estimated net worth of over $160 billion. But he’s long been an advocate of investing in as simple a manner as possible.
“There’s huge amounts of money that people pay for advice they really don’t need … In my view, for most people, the best thing to do is to own the S&P 500 index,” he said in May 2020.
Buffett has also famously said that 90% of his wife’s inheritance will go into an S&P 500 index fund. So he’s clearly a big fan of this strategy.
But SEC filings data recently revealed that Buffett’s company Berkshire Hathaway unloaded its entire positions in the Vanguard S&P 500 ETF and SPDR S&P 500 ETF Trust — two low-cost exchange-traded funds the company had previously held for years. And that’s a move that may be spooking investors and causing them to question their own portfolios.
Buffett did not explicitly say why his company chose to completely exit two established S&P 500 ETFs last quarter. But there are a number of reasons why he may have gone this route.
“… this could indicate concerns about market valuations, increased volatility, or even a shift toward individual stock selection over broad index exposure,” said Daniel Milks, founder of Fiduciary Organization & Woodmark Advisors, to etf.com.
Just because Buffett recommends that the typical investor put their money into the S&P 500 doesn’t mean that’s the strategy he needs to utilize. Buffett knows a lot more about investing and analyzing businesses than the typical person. So he doesn’t need to fall back on the broad market the same way an investor with minimal knowledge might.
Also, the shares of S&P 500 ETFs that Buffett dumped were, collectively, a pretty small position for Berkshire. It’s possible Buffett and team have exited small positions that don’t have a major impact on performance as a means of cleaning up their company’s portfolio, something they’ve reportedly done before.
