Buffett’s 90/10 rule: How the Berkshire chief’s inheritance strategy mirrors advice for everyday investors

Warren Buffett has reiterated the investment directives he outlined in his 2013 letter to Berkshire Hathaway shareholders, confirming that 90 per cent of the cash inheritance left to his wife, Susan Buffett, will be invested in a low-cost S&P 500 index fund. The remaining 10 per cent is to be allocated to short-term government bonds. This strategy, which Buffett has championed for over a decade, reflects his conviction that passive index investing offers superior outcomes for average investors compared to active stock picking.

Buffett’s stance was reinforced during the 2021 shareholders meeting, where he stated plainly that he does not believe the average person can successfully pick stocks. This philosophy underpins the Berkshire Hathaway chief’s approach to estate planning, prioritising broad market exposure through index funds over individual security selection. The S&P 500, which Buffett cites as his preferred vehicle, surged 24 per cent in 2023, demonstrating the resilience of large-cap equity exposure even amid geopolitical uncertainties such as the conflict in Iran.

The simplicity of this 90/10 split is designed to be replicable by non-billionaires through various digital investment platforms. Acorns, for instance, automates investing by rounding up spare change from daily purchases into diversified portfolios. The platform allows users to invest in dividend ETFs with as little as $5 and offers a $20 bonus for new users who set up recurring monthly deposits, providing a low-barrier entry point for those beginning their investment journey.

For investors seeking to build more complex portfolios or engage in direct stock ownership, SoFi provides a commission-free DIY investing platform with no account minimums. The service caters to both beginners and seasoned investors by offering real-time news and curated content to support decision-making. SoFi is currently offering up to $1,000 in stock for new accounts funded within a limited timeframe, aligning with the accessible nature of Buffett’s broader advice.

While index funds and bonds form the core of Buffett’s recommendation, the source material notes that professional guidance can significantly impact long-term outcomes. Research from Vanguard suggests that working with a financial advisor can add approximately 3 per cent to net returns over time. For investors with portfolios of $250,000 or more, platforms like WiserAdvisor can connect them with vetted financial professionals to help navigate personal financial obligations and optimise growth strategies.