Sometimes Less Is More

A complex portfolio isn’t always an effective one

In his company’s 2013 annual report, Warren Buffett included a discussion of his own family’s finances. He explained that he had established a trust for his wife’s benefit.

These were the simple investment instructions that he had provided to the trustee: “Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund”

That was it.

Despite Buffett’s being one of the wealthiest people in the world, the portfolio he recommended was remarkably simple—no actively-managed funds, no hedge funds, no private equity or any other seemingly sophisticated investments. Buffett’s view is that it really doesn’t need to be any more complex than that. I agree.