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Warren Buffett: Buying And Holding Index Funds Has Worked | CNBC

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Berkshire Hathaway CEO Warren Buffett speaks to CNBC's Becky Quick about this year's shareholder meeting and his best long-term investing tip. For more of Warren Buffett's wit and wisdom visit https://Buffett.CNBC.com » Subscribe to CNBC: http://cnb.cx/SubscribeCNBC About CNBC: From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more. Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Find CNBC News on Facebook: http://cnb.cx/LikeCNBC Follow CNBC News on Twitter: http://cnb.cx/FollowCNBC Follow CNBC News on Google+: http://cnb.cx/PlusCNBC Follow CNBC News on Instagram: http://cnb.cx/InstagramCNBC Warren Buffett: Buying And Holding Index Funds Has Worked | CNBC
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Text Comments (200)
Kelly KitKat (6 days ago)
What and which Index Fund would that be, specifically ? For the S&P Index Fund only officially came into being in 1957. So, is this a hypothetical index fund ? https://www.youtube.com/watch?v=3iFxUCSTfRU ... Confederate Slave Holdings, US Hay Company ... which basket of longterm buy and hold stocks would this be, exactly ?
Let's Start A Coin Collection (14 days ago)
This is amazing, thank you for the amazing insight!
Mike Kobrasark (21 days ago)
I am 16 and I have been investing in index fund for the past 4 years.
TheJadeen (12 days ago)
Mike Kobrasark How, you have to be 18....
Riley Griffith - Stock Market Videos (24 days ago)
Contribute maximum to a Roth IRA, put the money into S&P 500 index mutual fund, reinvest dividends! Simplest method and one of the most effective for long term growth. Investing doesn't have to be complicated!
Young-il Jeong (1 month ago)
Please make Korean language subtitle.
ThunderboltTangerine (1 month ago)
That's true, but what about Japan's stock market? Will probably never recover.
Amy Bruch (1 month ago)
Watch out, AOC is coming for your billions!!
?,?, (2 months ago)
Warren Buffett = CIAs bussiness manager
Fitness&Finance (2 months ago)
You could wait 20 years to triple your money after crashes up and down or you could quintuple your money this century holding a golden rock that just sits there with no counter-party risk and greedy CEOs and central banks constantly crashing your retirement funds by raising interest rates.
Jesus is God (3 months ago)
I get paid every week if i invest 65% of my check would i be able to retire in 10 years??
99% of you won’t GET IT (3 months ago)
TQQQ if you are betting on the index
xxx s (3 months ago)
This is all you ever need to know about investing
andresaoberni (3 months ago)
taking ONLY into account the value of S&P500 in 1942 vs 2018, 10000 would turn into a bit les than 3 million (which adjusted for inflation would be $193,349). Adjusted because 10k back then would be equivalent to $154,600 today. This means that dividends must have been around 48 million dollars. Something doesn't make sense mr Buffet.
wenen132 (2 months ago)
..... You do realize he said reinvest dividend funds and compound interest also works with dividends. Why would you take ONLY into account the value of S&P 500 when dividends reinvested are much more important?
bonelish (3 months ago)
Mr. Buffett's $51M projection after 76 years of compounding assumes an average annual return of 11.89% -- a _great_ deal higher than the actual total annual return (share price + dividend) of the S&P 500 over the 1942-2018 period.
Seadog95 (3 months ago)
10000 back then was a lot of money
beswick1111 (4 months ago)
if buffet was jewish, would the comments here be so positive? I don't think so I think they would be the complete opposite, imagine the conspiracy theories around WB if he were a jew? LOL, the Rothschild conspiracy theories would pale into nothing compared to the ones about WB. you guys know im 1000% right, even if you don't admit it here you all know im right.
Ionuț Sth (4 months ago)
Dă și mie 1 milion de dolari, mânca'mi-ai pula de boșorog.
The Difference (4 months ago)
*NEX* is the key to all of this! Thank you Warren Buffet!
Ellis Frost (5 months ago)
Only 18 now so putting aside money towards a house deposit and into an index fund, it's not masses but better to start young I guess :)
C Meeks (26 days ago)
You have the greatest asset going for you....time.
Lee Munro (27 days ago)
beswick1111... it’s a terrible idea it may go up but don’t hold your breath...silver doesn’t do anything
bjkarana (1 month ago)
​+Waz I don't have a preference, but John Bogle said it best: https://www.youtube.com/watch?v=n_bPmNUT0XA
Waz (1 month ago)
+bjkarana ETF VS Index??? Have you got an opinion on this
AussieMoneyMan (2 months ago)
Good on you man. I've done the same.
Penny Budget (5 months ago)
I’m trying to understand where he got his numbers from? S&P 500 back in 1942 was $8.93 which you could of purchased 1,119 shares for $10,000. Those shares today 1,119X$2885 = $3,230,683. Am I missing something?
Albert Einstein (2 months ago)
Suppose that each share provided annual dividends of 3.8% which were reinvested to increase the share portfolio, then essentially those 1119 shares over 76 years turn into 1119*1.038^76 = 19,047 shares. Then that many shares at $2885 each equates to a total of 19,047*2885 = $55 Million as buffet suggests. Now I'm not sure if the companies did provide a 3.8% dividend on average, but if they did, it would explain Buffet's figure.
andresaoberni (3 months ago)
+Leonardo Jacks dividend reinvesting plan? but still seems too much
VSpeaks (4 months ago)
+Noel Duffy noap you just corrected me which is cool.
VSpeaks (4 months ago)
+Noel Duffy yup I'm wrong
Matt Karin (4 months ago)
I don't think taking the S&P 500 totals from 1942 and present day is how you'd go about the calculation. Also, the S&P is a weighted index. Not to mention it doesn't look like you re-invested all the dividends for every year, plus the compounding effect of those re-invested dividends. The calculation is not as simple as it seems. The link below says the total return from the S&P from Oct 1942 to Oct 2018 was 412,693.782% if you re-invested your dividends. An investment of $10,000 puts the number at roughly $41.2 million. Pretty close to what Warren said. https://dqydj.com/sp-500-return-calculator/
cristian s (6 months ago)
The growth seen since 1942 shouldn’t be use to assume that it will happen like that in the future. Warren suggest to buy an index fund but who knows if USA will be a good country to invest maybe China will be the new USA
Diego Castillo (12 days ago)
Big Red (2 months ago)
R L So 80 years of growth isn’t enough evidence that we will still grow? WTF kind of evidence do you need ? lol If you look at the chart all you see is rise over 80 years even a 5 year old could predict it will keep going up lol
R L (3 months ago)
... lol
globalwarming19 (6 months ago)
With Trump president I don't think America will lose a war, but if he doesn't get elected then I'll sell depending on who our commander in chief is.
Vincent (6 months ago)
Buffett Warren I am, invest in Index Funds you shall.....hhhhmmmmmmm
jigyanshu shrivastava (6 months ago)
W W (6 months ago)
Worked for the US, didn't work for Japan and most European countries. So how about the next 50-60 years? Are you sure the US will grow as usual? Or will it fall like all great empires did in the past?
denis gromov (6 months ago)
Ok, i am officially confused now. I thought Warren Buffet was one of those dudes who said Index Funds are bad, and you should not invest in them and invest in firms that you researched instead. Also try to buy them at discount.
R L (3 months ago)
I don't think he EVER said they're bad. It's not his investment style though, and your potential returns are significantly lower with them.
Kenneth Lloyd (6 months ago)
He is not a fan of bonds
Kris B (6 months ago)
Isn't investing $10,000 in 1942 like saying inveat $100,000 in stocks today? Easy to say but who has/had that money to invest?
Brandon B (26 days ago)
Today? Not many. Most Americans have the ability to invest that, tax free, over time through a 401k though. Paying yourself 10% before anyone else, will make you wealthy.
Matt Karin (4 months ago)
....lots of people do. Either way he's just making a point, that a modest number can grow to a massive number over 70 years. Even if you invested $10,000 in today's dollars, the principle is the same. Compounding and re-investing dividends over a long period of time is God.
VSpeaks (5 months ago)
Alex Jones (6 months ago)
Buffett is very dishonest. And he has never said anything that is really valuable. Why doesn't he ever label the media as the big disaster for investors? Oh that's right, because the media promotes him.
R L (3 months ago)
Good grief. Dude. My gosh.
Brad Greenan (6 months ago)
Buffett's ears are longer than a Monday
Jason Gallant (2 months ago)
derkhaslol oh great my nose is already big 😂
Brad Greenan (6 months ago)
yeah I heard that before, a lot of old guys have giant ears
derkhaslol (6 months ago)
That's the funny thing, your nose and ears never stop growing. The older you get the bigger your nose and ears are.
D. A. (6 months ago)
Buffett doesn't say stuff to help us out. He says stuff to preserve and promote his public image. And while that is totally fair, take the advice with a grain of salt. For example Buffett says self driving car tech is moot, probably because that directly hurts his car insurance company geico.
R L (3 months ago)
+dremeler false. IF theoretically they reduce payouts, GEICO can do much more with its premiums.
William Bagley (6 months ago)
Driverless cars are BS
dremeler (6 months ago)
+l00katy0utb3 If the self driving cars dramatically reduce the accident rates, the need for car insurance would decrease
l00katy0utb3 (6 months ago)
I disagree, self driving cars equates to less accidents which means, less claims and that means more money for him and his shareholders.
D. A. (6 months ago)
canefan17 This is an interview for Buffett not a free strategy session for the masses. Buffett famously said he would never own airlines nor tech stock. Well today he owns both including Southwest Airlines and 5% of Apple.
kalp dalal (7 months ago)
Compounding is the 8th wonder of the world!
Waz (1 month ago)
Not so much with interests rates now a days ahah
Ohad Nitzan (7 months ago)
As far as I understand index funds include dividends. In March 1942 S&P 500 was 7.66 and now it's at 2800 level. That means roughly 365 times growth which means $10K would have turned into $3.65 million. What am I missing here?
canefan17 (6 months ago)
Yes, the dividend is automatically reinvested with index funds. But you have to own the index fund to receive those dividends, and then reinvest them. Dividends don't get reinvested into the price of a stock. They get reinvested into a shareholders shares of the stock.
Ohad Nitzan (7 months ago)
As far as I understand, the S&P 500 index already includes dividends, so this still doesn't make sense to me.
Moustafa Choucair (7 months ago)
hi ohad, the index would pay out a yield (roughly 3%) that 3% reinvested would make up the shortfall
محمد الراشد (7 months ago)
maybe that is because 10k then is not the same as 10k now.
borderlord (7 months ago)
Came for the Wisdom...got Distracted by the Legs😳
dexter cube (8 months ago)
Who is the lady at the end?
bjkarana (8 months ago)
well, to be fair, that's with a nearly 12% annual return over the last 76 years. Both Buffett and Jack Bogle have said that going forward, index funds are likely to see a long-term annual return of about 7% (per year). So: 1) buy low cost index funds, and 2) try and invest more of your income to offset slower growth. Worst case is you end up too wealthy.
Councilman Les Wynan (2 hours ago)
bjkarana go heavier on small cap value funds
Jacob (3 months ago)
Real return would be about 7%, but I dont really like to look at inflation-adjusted earnings because inflation doesnt always effect prices in equal weight
Jacob (3 months ago)
+Aaron "The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent" This is with reinvesting dividends and not inflated adjusted. This would only be the US stock market, which will be the only market I will be investing in over my investing career.
Aaron (3 months ago)
Jacob Why? Global real returns before fees and taxes have been 5.2% since 1900. Not 7-8%.
bjkarana (3 months ago)
+Jacob good point!
dawei liu (8 months ago)
He squeaks
Classical Liberal Warrior (9 months ago)
I hate to be excessively DUMB here but...Is Berkshire Hathaway considered a mutual fund? It certainly SEEMS like one! But, if so, what are the yearly expenses to own it? I can NOT find this last piece of information, and it BAFFLES me! :-(
Ryan Kirchberger (1 month ago)
No it’s a conglomerate
Bonnie Archie (4 months ago)
brk-b and brk-a shares.Its a stock.,It holds his many companies in it.The a shares are surreal look at the price.Ive held the B shares.havnt checked into prices in a while but I sold the B shared and made money..
roaringleo57 (6 months ago)
as of 8/27/18 one share of Berkshire Hathaway stock cost $312,850. So it's not for everyone.
LordOfNoobstown (9 months ago)
you dont have to be warren buffet to understand that the world economy is growing ever since the word economy has been used
Aaron Hayward (9 months ago)
America works- love it
Vincent Hunt (9 months ago)
$10,000.00 in 1942 had the same buying power as $159,047.74 in 2018
Kevin Kostyk (2 months ago)
+Peter Kirkwood This is literally the most ass-backwards math I've ever encountered on the internet.
Leggo My Ego (3 months ago)
+canefan17 It is if you live on either coast. California is in another real estate bubble that is starting to show signs of bursting again thanks to raising interest rates and the fact that someone in CA with a median income can't afford to buy a house in CA.
canefan17 (3 months ago)
Peter Kirkwood the typical home today is not 500,000.
rotagbhd (3 months ago)
+Peter Kirkwood Your numbers are off the mark. The average house cost $3770 in 1942. The average house cost $294,200 in October 2018. By your example: 3 houses would have cost $11,310 in 1942 and $882,600 in October 2018, nearly half of the $1,500,000 you're claiming. I hope your wife is in charge of the finances in your house.
rough rough (5 months ago)
Yea but who would wait and watch grow that big and spend that money? Lol
borderlord (9 months ago)
Does she auction her used panties?Please say yes!
Aaron Kurz (9 months ago)
sent4dc (9 months ago)
He always has such a positive attitude. Love Warren!
Raymond Payette (10 months ago)
Not quite true.In 1942 with $10,000 you could buy a nice house, so it's like $250,000 in today's value. There was no stock exchange account like SPY, so you might invested in GM, Texaco and TWA that wouldn't have worked out so well.
Mark M (10 months ago)
this is such a load of nonsense. buffett does not and has never invested in index funds. learn about the market and make your own picks, only way to get rich
Ultimate Gattai (6 months ago)
@interests10, did you look at something like Vanguard's sp500? That's where Warren Buffet's money will go after he dies, I haven't really looked at etfs much.
interests10 (6 months ago)
which index funds r good and this include etfs or not?
Ultimate Gattai (7 months ago)
Index funds are a legit strategy, If you can't devote the time and effort to picking stocks, you can at least guarantee a decent win through a good index.
fendermon (9 months ago)
You missed his point mark. His point is you don't need to be a stock picking wizzard to do well. A relentlessly higher market proves him right.
Alexander G (10 months ago)
What happened if you bought a waterfront land lot on Long Island in 1942?
Marcus Lance (24 days ago)
Alexander G They have a net worth tax in Europe ? That’s ridiculous ! Which country are you from ?
Reasonable Speculation (8 months ago)
Managing real estate is a lot more stressful and time consuming then Index Funds.. Also much more risk...  Buy a piece (S&P) of  the Means of Production and let  the Pros handle the 'day to day', then take your cut (dividend) of the profit...
Alexander G (9 months ago)
Mechannel Usually you can Transfer Property taxes 100% to the tenant. If you sell land or buildings that you own at least 10 years, the gain is Tax free! This is the situation in Europe, I pay 35% income tax on dividens plus net worth tax every year
Mechannel (9 months ago)
It would mean you've been paying sky high property taxes for decades. Index funds don't send you a fat tax bill every year.
scott offord (10 months ago)
Always a good listen. Dollar cost average investing over 35 years will allow me to retire comfortably. I advise all young people to begin EARLY
canefan17 (3 months ago)
You haven’t missed it at all. I’m 35 and know I haven’t missed it.
bonelish (3 months ago)
+S You haven't. Most people your age are paying off student debt, or current tuition if they attend graduate school. As Mr. Buffett noted, a $10K investment compounded over 50-70 years at 7-8% grows to a bloody fortune. Even if you don't have the full $10K in year one, you can build it up over a couple years (say, $3,333 per year for three years), and have your $10K initial investment. The secret is _time_ and the arithmetic of compounding (and the dividend contributes a very substantial part of your return in year 50 through 75). (Of course, you'll be a 100 y.o. in year 75 of your investment...but you'll have $51M!)
S (4 months ago)
Thanks guys
Ed (5 months ago)
You haven't. Just get investing. Looks like stocks could be getting cheaper. A great time to start.
traindawg (5 months ago)
That's insane. Perfect time to start. Start now and in 40 years you'll be a millionaire.
koko nuts (10 months ago)
ur old enough, take a rest 😏😇
Breaking Toast (10 months ago)
no doubt Warren Buffet is a genius I just wish he wasn't so bearish on bitcoin I have stocks and bitcoin
canefan17 (6 months ago)
Block chain is here to stay - but bitcoin ain't. That will be its contribution though to the market.
Abitamim Bharmal (9 months ago)
Breaking Toast ethereum is much better. And asset based crypto is a good idea. Without anything backing it up, it is only with it's hype. It could crashes or boom.
Breaking Toast (9 months ago)
Abitamim Bharmal .i know but thats not the point it has become the driving force for blockchain it is the gold standard they are very few but can be used as a base of wealth accumulation to attain faster growing alt coins with faster speedier technology , do you understand why it is at the price it is today why do people assume bitcoun actually has to be the ultimate crypto it is still doing its job and more it drives the market with its inovation
Abitamim Bharmal (9 months ago)
bitcoin isnt even a good cryptocurrency
Alief RezkiNanda (10 months ago)
Because bitcoin is not Investment
Endika Aboitiz (10 months ago)
we are going next year..
Blockchain Gael (10 months ago)
🚀Buying & Hodling Bitcoin has worked for me, from $150 6years ago to 20k 6months ago 😄
Alex (1 month ago)
+Byron S-Wills Exactly lol. I doubt they'll come back boasting now. Their initial posts were likely a feeble attempt to solicit attention to make them feel some type of way, but EVERY avid investor knows cryptos were nothing more than a bubble for the sheep to flock to. Sure some made a killing (the early "adopters"), but MOST got burned badly. Cryptos have literally 0 intrinsic value, little to no protections for "investors" (gamblers really), and were and are still being pumped up by fraudulent "analysts" and children who've never invested a single dime in their lifetime before gambling with BTC. Hilarious really.
Byron S-Wills (2 months ago)
Blockchain Gael January 2019 how’s that crypto treating you now 💸🔥🤣
canefan17 (6 months ago)
lol @ cryptocurrencies.
Chris Baker (6 months ago)
Hopefully you sold bitcoin in December or January.
Blockchain Gael (9 months ago)
Spreading FUD is pointless laulz just shows your an imbecile.
Murrell Selden (10 months ago)
Could be the turn now happening means "short the index funds." But who will get hurt the most? Obvioously the top 1% and 10%!
Fred Howland (10 months ago)
Becky is a goddess.
Saral Thakur (2 months ago)
True. A hottie
Ingrid P (2 months ago)
All that dye and make up....
Shatner Williams (6 months ago)
Fred Howland ^^ thirsty beta
Ganesh Nayak (10 months ago)
Love America.. Please hold on to your capitalism ethos.
Doug bananaboy (22 days ago)
Antonio Lansang yes your term is correct “corporatism “. So much tax payer money gets funneled to corps . Ind pay 30 percent tax while corps pay 0 or 9 percent in many many cases ..as one example of Corp rule over ind . It’s not red vrs blue . It’s Corp vrs individuals
Antonio Lansang (22 days ago)
+Doug bananaboy Socialistic bailouts? Corporatism would like to take some credit.
canefan17 (7 months ago)
Ganesh Nayak absolutely. Best system the world has ever seen.
Reasonable Speculation (8 months ago)
Ganesh Nayak … Agreed... Sad to see Americans living so well for so long that they become complacent, and ignorant of economic fundamentals,,,, crying like children when things do not go just as they would like, when they should take the opportunity to become Owners of the means of Production.
Abitamim Bharmal (9 months ago)
probably has some indian friends at google
Dom Jervis (10 months ago)
This is just such the BIGGEST CROCK! Becky is servicing the Ol' Boy's Ol' Boy just to get an interview from him...year after year after year after year. She has ABSOLUTELY NOTHING ELSE to offer the Ol' Codger. And it's not as if his interviews are worth anything to Retail Investors. He's as bad as Greenspan was in terms of Guidance to the millions who cared about what he said. Both of them...worthless...absolutely worthless...
DL (6 months ago)
yawn, sigh....
canefan17 (6 months ago)
yawn - another lefty liberal who's jealous of his wealth. Buffett has nothing to gain by intentionally giving you bad investment advice. And spare me any sort of profit motive line.
bjkarana (8 months ago)
oh I bet he's a day-trader. I keep a quart of milk longer than most of those braggarts hold a stock.
Mirza Uwais (10 months ago)
I’m alone smiling about Sir warren smile style when I think alone, body style with smile style very joke smile..👍✌️
Richi Ranas (10 months ago)
Can’t wait for deranged old phukfaces like this to die off😏
Mac _ (6 months ago)
Seems like your jealous
Ryan O'Donnell (10 months ago)
America works :D
bighands69 (10 months ago)
Index funds did not exist in 1942 but his point still stands. They have been available since the 1960s and if you invest today they will grow to a large amount in 20,40 or 60 years. If you bought a series of blue chip stocks in the 1940s guess what the same thing would happen. Long term value investing creates amazing growth. Buffett is bang on the spot with that one.
canefan17 (6 months ago)
It's a buy and hold approach. If you're saying an S&P or total market index fund is going to get slaughtered in the future, what kind of time period - how long? Because a buy and hold approach cares very little about what happens in the short term. Think 30-40 years. The market will continue to head up in the long-run, as it always has.
Big Red (6 months ago)
Zoltán Juhász Nobody buys gold as an investment and if they do they are stupid and will make no money
interests10 (7 months ago)
stephen geraci what index funds are good??
Zoltan Juhasz (9 months ago)
thevoxdeus Well, you are not wrong. But I would only buy gold, if I would absolutely want to bet on an upcoming market crash crashing everything. But if the crash is delayed, or limited, then you are losing money on gold.
thevoxdeus (9 months ago)
The great thing about investing in equities is that you can pull your money out and buy bonds or Tbills if interest rates climb past the point of expected equity returns. Rising interest rates aren't the danger. The danger is that you have your money in the market, the market crashes, and then before the market can recover, you need your money, so you pull it out of the market at a steep discount. If inflation goes crazy, it's going to hurt any one whose wealth is denominated in dollars, which means any one not holding real estate, gold, or something that's similarly hedged against inflation. The problem is, does any one trust products that are backed by real estate, after the 2007-2008 meltdown? If interest rates and inflation take off at the same time, then buy gold (or silver, or whatever you think is the best priced commodity). In any case, it all depends on the time line you're talking about. For some one who is investing for 20-30 years from now, equities are a fine purchase even in the face of inflation and high interest rates. Even if they slump over the course of 3-4-5 years, or even a decade, as long as the underlying value exists, the equity market will eventually reflect it.
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