Warren Buffett to heirs: Put my estate in index funds

This article was originally published on Quadrant Group’s website. Quadrant Group was acquired by Progeny in March 2017.

If you are wondering what the investment sage Warren Buffet is planning for his own financial legacy, you may be surprised to learn that his advice is not to bother with Wall Street and active fund managers. In his most recent letter to shareholders at his company, Berkshire Hathaway, Buffet states: “Both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.”

The farming analogy speaks volumes about long-term investing. I don’t own a 400 acre farm like Buffet, but the small veggie plot in my back garden demonstrates the same principles. It takes skill or at least many years of faithfully watching Gardeners World to grow anything consistently year on year. Anyone who thinks that you can toss a packet of seeds and return a salad is in for disappointment. My humble lettuces have to be protected from all sorts of pests and the weather is never reliable. Likewise, you can’t make a salad if you only plant onions. It takes knowledge, planning and patience to get healthy results.

Buffet’s recommendation is to reduce your investment costs. Reducing costs is the only free lunch you get in investing and is achieved without taking any risk. Costs are not always easy to spot. Giving away a little here and there does not sound like much perhaps, but it is over the life of your investment. The small differences of return compound into large differences over time. In today’s environment, they deserve greater scrutiny than ever. At the Quadrant Group, we are always working towards using our collective purchasing power to drive down provider’s costs on behalf of our investors. We are there to keep a firm hand on the tiller to make sure that your wealth yields a return on offer from the market as closely as possible.

If Warren Buffet, the legendary green-thumb of investing is telling his own estate advisors to take the farming approach, it says a lot about the long term benefits of knowing your onions and keeping costs rooted.

Read The Article on MarketWatch

This article does not constitute financial advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner to take into account your particular investment objectives, financial situation and individual needs. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and the value of investments can fall as well as rise. No representation is made that the stated results will be replicated.

Andrew Pereira

Director, Wealth

Andrew has been working with families, high-net-worth clients and business owners for well over 20 years.

Learn more about Andrew Pereira