Warren Buffett’s 90/10 investing formula—90% in a low-cost S&P 500 fund and 10% in short-term bonds—offers simplicity, low fees, and steady long-term growth.
Warren Buffett’s “90/10 rule” has become one of the most discussed investment formulas among everyday investors—a strategy that combines simplicity, patience, and trust in the long-term strength of the U.S. economy.
The concept, outlined by Buffett in a 2013 letter to Berkshire Hathaway shareholders, is straightforward: allocate 90% of your investment portfolio to a low-cost S&P 500 index fund and the remaining 10% to short-term U.S. government bonds. Buffett’s rationale is that most individuals lack the expertise to consistently pick winning stocks, and even professional fund managers rarely outperform the broader market.
“I have good news for these non-professionals,” Buffett wrote. “American business has done wonderfully over time and will continue to do so.” He added that investors should avoid high fees and complex strategies, and instead let the power of compounding and economic growth work in their favor.
The billionaire investor even instructed that his own estate be managed this way, directing trustees to apply the 90/10 mix for his wife’s inheritance—90% in an S&P 500 index fund, 10% in short-term Treasuries. Buffett expressed confidence that such a portfolio would outperform those run by most institutional investors and high-fee managers.
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The appeal of the 90/10 rule lies in its simplicity and low cost. A broad S&P 500 fund provides exposure to some of the world’s most valuable companies, while a small bond allocation adds liquidity and reduces risk during market downturns. Historically, the S&P 500 has returned around 10% annually before inflation, making it one of the most reliable long-term wealth builders.
However, critics caution that a 90% equity allocation may not suit everyone—especially retirees or investors nearing retirement, who have less time to recover from potential market shocks. For younger or long-term investors, though, the strategy provides a balance of growth potential and minimal oversight.
A 2020 study by finance professor Javier Estrada found that Buffett’s 90/10 allocation held up strongly across decades of historical data, outperforming more conservative mixes like 60/40 in both returns and sustainability during retirement withdrawals.
Ultimately, Buffett’s advice captures a timeless investing truth: simplicity and discipline often beat complexity. By focusing on low fees, patience, and long-term growth, the 90/10 rule embodies his enduring faith in the resilience of American enterprise.
Africa Daily News, New York
