Warren Buffett turned Berkshire Hathaway become one of the largest companies in the world thanks to a litany of wise investments. In fact, its stock price has soared more than 4,300,000% since he took control in 1965. This accomplishment has made Buffett one of the most revered figures in the financial world.
Surprisingly, Buffett never recommended Berkshire stock. Instead, he regularly advises investors to periodically buy shares of an index fund that tracks developments. S&P500 (INDEXSNP: ^GSPC). This strategy provides diversified exposure to hundreds of U.S. companies that are collectively “destined to do well” over time, according to Buffett.
Indeed, history shows that investors can build a portfolio of $903,800 over three decades by simply investing $350 per month in an S&P 500 index fund. Here’s how.
The Vanguard S&P 500 ETF provides diversified exposure to hundreds of U.S. companies
THE Vanguard S&P 500 ETF (NYSEMKT: VOL) measures the performance of 500 U.S. companies, a mix of value stocks and growth stocks from all market sectors. The index fund covers about 80% of U.S. stocks and nearly 50% of global stocks by market capitalization, meaning it spreads money among many of the world’s most influential companies.
Artificial intelligence (AI) is one of the tailwinds expected to drive the S&P 500 higher in the coming years. Just as e-commerce, mobile connectivity and cloud computing have driven the index higher in recent years, many experts see AI as the defining investment theme of the next generation. Indeed, the five largest holdings in the Vanguard S&P 500 ETF (shown in the chart) are all well-positioned to monetize AI in the future.
Here’s a look at each company.
Microsoft (NASDAQ:MSFT) is the largest enterprise software provider and the second largest cloud computing provider. The company is monetize artificial intelligence with generative AI co-pilots for its software products and cloud AI services. Most notably, Microsoft Azure lets developers build generative AI applications with large language models from ChatGPT creator OpenAI.
Apple (NASDAQ:AAPL) has cultivated its brand authority across several consumer electronics verticals and has a particularly strong presence in the smartphone market. The company is undoubtedly lagging behind its big tech peers when it comes to AI monetization, but upcoming iOS releases are said to feature AI-based search, summaries, photo editing, and other automations. AI.
Nvidia (NASDAQ:NVDA) Graphics processing units (GPUs) deliver unmatched performance when accelerating data center workloads such as artificial intelligence applications. The company has more than 80% market share in AI chips, and its broad product ecosystem – spanning hardware, software and services – makes Nvidia a one-stop shop for building data centers complete AI systems.
Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is the market leader in digital advertising and the third largest cloud computing provider, and leverages artificial intelligence in both product categories with its Gemini model. Specifically, Gemini simplifies the creation of ad campaigns with natural language, supports the development of generative AI applications, and automates work in its Google Workspace office productivity suite.
Amazon (NASDAQ:AMZN) enjoys a leading position in e-commerce, retail advertising and cloud computing, and the company uses artificial intelligence in all three product categories. Rufus is an AI-powered sales assistant, Amazon Ads offers generative AI for creating brand images, and Amazon Bedrock is a cloud service for developing generative AI applications.
The Vanguard S&P 500 is a simple, inexpensive way to build wealth
The S&P 500 is a proven source of income. The index has outperformed virtually every other asset class over the past two decades, from international stocks and fixed income to real estate and precious metals, and it has been a profitable investment in every 20 years. years of its history.
The S&P 500 has returned 1,970% over the past 30 years, or a compound return of 10.62% per year. At this rate, $350 invested monthly would be worth $74,200 in a decade, $288,100 in two decades and $903,800 in three decades. Of course, past performance never guarantees future returns, but even a more conservative 10% annual growth rate would turn $350 invested monthly into $791,000 over three decades.
Warren Buffett believes that “American companies – and therefore a basket of stocks – will almost certainly be worth much more in the years to come.” His logic is simple: the United States is the largest and arguably most innovative economy in the world. Indeed, 16 of the world’s 20 largest companies are American companies, and the American stock market is by far the largest.
This makes a compelling argument for investing in U.S. stocks, and the Vanguard S&P 500 ETF is essentially a basket of the best-performing U.S. companies. Plus, with an expense ratio of just 0.03%, meaning annual fees will total $3 for every $10,000 invested, the index fund is a simple and inexpensive way to build wealth.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions in Amazon, Nvidia and Vanguard S&P 500 ETF. The Motley Fool holds positions in and recommends the Alphabet, Amazon, Apple, Berkshire Hathaway, Microsoft, Nvidia, and Vanguard S&P 500 ETFs. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short 405 calls $ in January 2026 on Microsoft. The Mad Motley has a disclosure policy.
Warren Buffett recommends this index fund. That could turn $350 a month into $903,800, with help from AI stocks. was originally published by The Motley Fool
