Question: “What advice would you give to someone who is not a professional investor? Where should they put their money?”
Answer from Buffett: “Well, if they’re not going to be an active investor – and very few should try to do that – then they should just stay with index funds. Any low-cost index fund. And they should buy it over time. They’re not going to be able to pick the right price and the right time. What they want to do is avoid the wrong price and wrong stock. You just make sure you own a piece of American business, and you don’t buy all at one time.”
Response from Charlie Munger, long-time partner of Buffett’s and Vice Chairman of Buffett’s Berkshire Hathaway: “If you don’t have any real prospects for being a very skilled professional investor, of course you should compromise on some simple thing like an index fund.”
And Buffett’s follow up response: “And you won’t get that advice from anybody, because nobody gets paid to give you that advice. So you’ll have all kinds of people telling you how much better they can do for you than that — and how if you just give them a wrap fee or commission or whatever it may be, they’ll do better. But they won’t do better.
“You will get a perfectly decent return over a 30 or 40 year period by doing what I suggest. And in the end, why should you expect more than that if you don’t bring anything to the party? Salesmen will tell you that you’ll get more — but you won’t…”
