Warren Buffett Way

One of the main fears of the investor lies in the long upward cycle of Wall Street, which suggests that the country’s economy will sooner or later fall into a tailspin. However, some of the great gurus of the market do not hesitate to recommend being always invested in the United States. Some of the prophets of the American stock exchange like the Oracle of Omaha, Warren Buffett, or the founder of Vanguard, John Bogle, flee from the enigmas and prophecies when sharing some of the factors that have served as a pillar to orchestrate their rounds fortunes.

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Do not believe market capitalization

Coincidence, or not, both favor products with low commissions and above all the passive monitoring of a stock market indicator, with a clear preference for the S&P 500. To this we should also add an implicit aversion for diversification beyond US equities. For example, Buffett, who currently holds the third place in the ranking of individuals on the planet, with around 84,800 million dollars, does not rip his clothes when he recommends his own wife to invest 90% of their budget in a fund indexed to the S&P 500 and the remaining 10% in US treasury bonds.
“Unlike most indexes weighted by stock market capitalization, the S&P 500 is managed by a committee and not by mechanical rules,” explains by Adam McCullough, a strategist at Morningstar who stresses that this structure increases flexibility at the expense of transparency.

S&P 500

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Strict selection of S&P 500

It is true that this supervisory body demands high standards from companies that aspire to be included in this indicator compared to similar indexes. Among them it is included that companies that do not achieve certain strict benefits can not access, that is why promising company Tesla is not part of the S&P 500. Nor it happend also to a company like Snap, the Snapchat matrix, whose structure in common actions (separated enter those that have voting rights and those that do not) of the company hit with the new standards imposed by S&P Dow Jones Indices. Therefore, the key for individual investors success through investment in S&P 500 is be discipline and patience, just see investment like monthly obligation to spare your income for future wealth.

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