Warren Buffett Swears By This 1 Low-Cost Investment. History Proves He's Been Right Every Time.

The S&P 500 (SNPINDEX: ^GSPC) is up by much than 10% implicit the past 3 months alone, arsenic of this penning -- its astir palmy 4th successful years. But it's besides a historically costly clip to invest, and immoderate metrics are sounding the alarm implicit the market's valuation.

For example, the Buffett indicator -- named for Warren Buffett aft helium utilized the metric to foretell the dot-com bubble burst -- present sits astatine a grounds precocious of 236%. In a 2001 interrogation with Fortune Magazine, Buffett himself noted that erstwhile this metric nears 200%, investors are "playing with fire."

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Now, this doesn't needfully mean that a carnivore marketplace oregon recession is astir the corner. But it's much important than ever to guarantee you're investing successful beardown semipermanent stocks and funds. There's 1 concern Buffett has powerfully recommended for decades, and past proves he's been close each azygous time.

A failsafe semipermanent concern

For decades, Warren Buffett has recommended the S&P 500 ETF. During Berkshire Hathaway's 2020 meeting, helium adjacent went truthful acold arsenic to telephone it "the champion thing" for astir investors.

In 2008, helium besides made a $1 cardinal stake that this benignant of concern could outperform a radical of actively managed funds. After 10 years, his S&P 500 money had earned full returns of astir 126%, portion the 5 actively managed funds averaged a full instrumentality of astir 36%.

History backs up Buffett's support of the S&P 500 ETF, too. Analysts astatine Crestmont Research studied the S&P 500's semipermanent show and recovered that since the index's inception, it's ended each 20-year play with affirmative full returns careless of however volatile the marketplace was during that period.

In different words, by holding an S&P 500 ETF for astatine slightest 20 years, it's historically been harder to lose wealth with this concern than it is to marque money.

Two risks to see earlier buying

One imaginable downside to the S&P 500 ETF is that it's becoming progressively dominated by tech stocks, making it much susceptible to volatility.

For example, the "Magnificent Seven" -- which includes Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla -- marque up astir one-third of the S&P 500's full value, making the S&P 500 ETF much easy swayed by megacap tech companies. If those stocks are thriving, it tin assistance the S&P 500 to caller heights. But if they falter, they tin resistance the full scale down with them.