The Gap Between What Warren Buffett Recommends and What Berkshire Hathaway Does: Understanding S&P 500 Investing

The Confusing Signal From the Oracle of Omaha

Warren Buffett has long advocated for average investors to take a straightforward approach: regularly invest in an S&P 500 exchange-traded fund (ETF). Yet in Q4 2024, Berkshire Hathaway made headlines by completely exiting its position in the Vanguard S&P 500 ETF (VOO), raising an important question for retail investors about whether to follow his words or his company’s actions.

This apparent contradiction stems from a fundamental misunderstanding: Berkshire Hathaway operates under completely different parameters than individual investors. With dedicated teams of analysts, sophisticated risk management systems, and capital that moves markets, the trillion-dollar conglomerate plays a different investment game entirely. What works for Berkshire’s massive portfolio doesn’t necessarily apply to personal wealth building.

Why Individual Investors Should Prioritize Buffett’s Advice Over Corporate Moves

The core principle Buffett champions—consistent S&P 500 investing—remains sound for everyday investors precisely because of its simplicity and effectiveness. Unlike picking individual stocks or attempting to time the market, an S&P 500 ETF provides three critical advantages that even rival mutual funds struggle to match in terms of cost efficiency.

First, you gain instant exposure to approximately 500 of America’s largest corporations across every sector. Information Technology alone represents 34.8% of holdings, followed by Financials (13.5%), Consumer Discretionary (10.5%), and Communication Services (10.1%). This built-in diversification means your investment naturally spreads risk across Healthcare, Industrials, Consumer Staples, Energy, Utilities, Real Estate, and Materials.

Second, the expense ratio of just 0.03% makes VOO extraordinarily cost-effective—a major advantage when comparing ETFs versus mutual funds, where many active management fees drain returns over time. Third, these aren’t speculative holdings; S&P 500 inclusion requires meeting strict capitalization and financial thresholds, ensuring you’re exposed to fundamentally sound businesses.

The Long-Term Wealth Engine

Investing in an S&P 500 ETF essentially bets on sustained American economic growth. Since its inception, VOO has delivered returns that have significantly outpaced inflation and enriched millions of long-term investors. While past performance doesn’t guarantee future results, the diversified nature of 500 established businesses—from tech giants like Microsoft and Apple to financial powerhouses—provides the structural foundation for continued returns.

Your personal circumstances—risk tolerance, time horizon, and financial goals—should determine whether this approach fits your portfolio, not the tactical decisions of institutional investors managing hundred-billion-dollar holdings. Buffett’s recommendation remains strategically sound for those building wealth through regular, disciplined investing rather than attempting to outsmart market movements.

The choice between following Buffett’s time-tested advice and mimicking Berkshire’s corporate maneuvers comes down to honest self-assessment: Are you equipped with professional-grade research, diverse capital sources, and sophisticated hedging strategies? If not, the S&P 500 ETF route remains the more prudent path.