Warren Buffett Index Fund Portfolio
1.98%April 16 | MyPlanIQ portfolio symbol P_76645

  • Portfolio Overview
  • Asset Allocation and ETFs
  • Performance
  • Calculators
  • Rolling Returns
  • Drawdowns

Portfolio Overview


This portfolio is also called Warren Buffett Index Portfolio (90/10) or Warren Buffett ETF Portfolio (90/10), a strategy inspired by the investment principles outlined by Warren Buffett himself. In a letter to Berkshire Hathaway investors in 2013, Buffett revealed his instructions for the trustee of his wife's inheritance. According to his guidance, 90% of the funds were to be allocated to a low-fee stock index fund, while the remaining 10% would be invested in short-term government bonds.

The Warren Buffett Index or ETF Portfolio (90/10) is designed to offer a straightforward and passive approach to investing. By allocating a significant portion of the portfolio to a low-fee stock index fund, investors can capture the long-term growth potential of the stock market. Index funds aim to replicate the performance of a specific market index, such as the S&P 500, providing broad exposure to a diverse range of companies.

The choice of a low-fee stock index fund aligns with Buffett's emphasis on keeping costs low. By opting for funds with minimal expense ratios, investors can maximize their returns over the long run. Low fees ensure that a larger portion of the investment's performance directly benefits the portfolio, rather than being eroded by high costs.

In addition to the stock index fund, the portfolio also includes a 10% allocation to short-term government bonds. This allocation provides a conservative and stable component to the portfolio. Short-term government bonds are typically considered low-risk investments and can act as a hedge against market volatility.

The 90/10 allocation reflects Buffett's belief in the long-term growth potential of the stock market, while also acknowledging the importance of preserving capital through more conservative investments. This balance allows investors to participate in the market's potential upside while maintaining a level of stability.

The portfolio is suitable for anyone's long term investment portfolio as long as one is prepared for the investment that will not be tapped for a long time, preferrably over more than 20 years.

Asset Allocation

The portfolio consists of the following

Stocks VFINX 90%
Bonds VFISX 10%

It's simulated from 10/30/1991

ETF and Other Fund Substitutes

Substitute

VFINX to VOO, SPY, VTI

VFISX to SHY, USFR, TFLO,BSV

Diversification and Risk Level

The portfolio is heavily weighted toward U.S. large-cap stocks, which means it is highly correlated with the performance of the U.S. economy. While the S&P 500 is diversified across sectors, it lacks exposure to international stocks, small-cap stocks, and other asset classes like real estate or commodities. The 10% bond allocation helps mitigate risk but is relatively small, making the portfolio more suitable for investors with a higher risk tolerance.

Pros and Cons

Pros:

  • Simple and easy to manage.
  • Low-cost due to the use of index funds.
  • Historically strong long-term returns from the S&P 500.
  • Minimal maintenance required.

Cons:

  • Limited diversification outside U.S. large-cap stocks.
  • Higher volatility due to the heavy equity allocation.
  • No exposure to international markets or alternative assets.
  • May not be suitable for conservative investors or those nearing retirement.

Application for Retirement Accounts (401(k) and IRA)

This portfolio can be easily implemented in retirement accounts like 401(k)s and IRAs. Here's how:

  1. Identify Equivalent Funds: In a 401(k) plan, look for an S&P 500 index fund (e.g., VFIAX, FXAIX, or similar) for the 90% allocation. For the 10% bond allocation, seek a short-term bond fund or a stable value fund if available.
  2. No Exact Match? If your 401(k) lacks a specific fund, approximate the allocation:
    • For VOO (S&P 500), use a U.S. large-cap stock fund or a total U.S. stock market fund.
    • For BSV (short-term bonds), use a general bond fund or a money market fund if no short-term bond option exists.
  3. IRA Flexibility: In an IRA, you can directly purchase VOO and BSV or their mutual fund equivalents (e.g., VFIAX for VOO and VBIRX for BSV).

Rule of Thumb: 

  • For stock funds, prioritize index funds, especially low-cost index funds
  • For bond funds, prioritize core bond funds or high-quality actively managed total return bond funds  (if available).
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Asset Allocation


Symbol Category/Sector Target Weight
VFINX
VANGUARD 500 INDEX FUND INVESTOR SHARES 		US Equity 90%
VFISX
VANGUARD SHORT-TERM TREASURY FUND INVESTOR SHARES 		Fixed Income 10%


Historical Performance


The return data shown below all have the same latest date: 04/16/2025.
AR inception is since 12/16/1994.
Name YTD Return 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR 20Yr AR Inception
Warren Buffett Index Fund Portfolio -8.90% 5.61% 7.50% 13.87% 10.56% 11.36% 9.30% 9.89%
VFINX (VANGUARD 500 INDEX FUND INVESTOR SHARES) -9.99% 5.71% 7.80% 15.21% 11.50% 12.41% 9.94% 10.44%
VSMGX (VANGUARD LIFESTRATEGY MODERATE GROWTH FUND INVESTOR SHARES) -2.46% 6.56% 4.41% 7.52% 5.36% 6.37% 5.86% 7.34%

Warren Buffett Index Fund Portfolio Return Calculator

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Calculators


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Rolling Returns


From 10/30/1991 to 04/16/2025, the worst annualized return of 3-year rolling returns for Warren Buffett Index Fund Portfolio is -13.73%.

From 10/30/1991 to 04/16/2025, the worst annualized return of 5-year rolling returns for Warren Buffett Index Fund Portfolio is -5.36%.

From 10/30/1991 to 04/16/2025, the worst annualized return of 10-year rolling returns for Warren Buffett Index Fund Portfolio is -2.4%.


Maximum Drawdown

Warren Buffett Index Fund Portfolio Maximum Drawdown