The Tool Desk
Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Warren Buffett’s “90/10 rule” is a trust-investment instruction: put 90% of the cash in a very low-cost S&P 500 index fund and 10% in short-term government bonds. It is not a universal portfolio prescription. In Berkshire Hathaway’s 2013 shareholder letter, Buffett gave that advice to a trustee managing money for his wife, and suggested Vanguard.
What is Warren Buffett’s 90/10 rule?
In a letter to Berkshire Hathaway shareholders dated February 28, 2014, Buffett wrote: “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.” He followed that with: “(I suggest Vanguard’s.)” The commonly used name puts the larger allocation first: 90% stocks and 10% bonds. Read Buffett’s 2013 shareholder letter.
The surrounding passage matters. Buffett was describing how cash left for a trustee under his will should be invested for his wife’s benefit. He also said his Berkshire shares were to be distributed to philanthropic organizations. The 90/10 instruction belongs to that specific trust context; the letter does not assess every investor’s goals, finances, or ability to tolerate losses.
Why did Buffett favor this approach?
Buffett’s broader point is that most non-professional investors are better served by owning a broad cross-section of businesses than by trying to pick individual winners. A low-cost S&P 500 index fund offers exposure to large U.S. companies through one fund. He also emphasizes investing over time, resisting the urge to sell when news is bad and stocks have fallen from highs, and keeping investment costs low.
Crashes, No Sound, or Screen Glitches?
Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minutePC Slower Than It Used to Be?
A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11#1 Best Overall
These principles explain the thinking behind the trustee instruction, but they do not turn it into a guaranteed outcome or a personalized allocation. Buffett expressed a qualitative belief that the trust’s long-term results would be superior to those attained by most investors using high-fee managers. The letter gives no expected return, volatility, maximum loss, or backtest for the 90/10 mix.
What does the letter leave unspecified?
Buffett named investment categories, not a complete implementation plan. He did not identify a specific ticker or security, bond maturity, account type, tax treatment, or rebalancing schedule. Nor does “very low-cost” identify a particular fund’s current expenses. Those details would need to be chosen and checked separately.
Rank #2
- Equity fund: Confirm that it tracks the S&P 500 and review its current prospectus and shareholder report.
- Bond investment: Determine what “short-term government bonds” means for the instrument, maturity, and account you would use; the letter specifies no particular security or fund.
- Costs and tracking: Check ongoing fees and expenses, trading costs, and how closely the fund has tracked its index.
- Personal fit: Consider whether the mix aligns with your goals, investing timeframe, and willingness to withstand losses.
What risks should an investor understand?
An index fund is a mutual fund or exchange-traded fund that seeks to track an index; the index itself cannot be purchased directly. A fund may hold all of an index’s constituents or use sampling. It can lag its index because of fees, expenses, trading costs, or tracking error, and it remains exposed to the risks of the securities it owns. The SEC advises investors to review a fund’s prospectus and shareholder report, including its risks, costs, index makeup, and fit with their goals. SEC: Index Funds.
The 10% bond allocation is not a guarantee against losses, and the letter does not say that bonds will always rise when stocks fall. A 90% equity allocation can also expose an investor to substantial stock-market declines. Buffett’s statement provides no quantified risk or performance forecast for this particular mix.
Recommended Free Tools
Is the 90/10 rule right for you?
The letter is best read as Buffett’s instruction for a particular trust, not as a retirement plan or a one-size-fits-all recommendation. Before adopting a similar allocation, consider your timeframe, financial needs, goals, and capacity to bear a market decline. The U.S.-focused instruction also does not explain how investors outside the United States should adapt the stock index or government-bond exposure, or account for currency, tax, and account-structure differences.
If you are considering the approach, use current fund documents to evaluate the actual investments rather than relying on the phrase “Buffett’s 90/10 rule” as a product recommendation. For background on Buffett’s investing influences, he wrote that he bought Benjamin Graham’s The Intelligent Investor in 1949 and learned most of the ideas in his investment discussion from Graham’s book.
Quick Recap
Rank #4
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
