2004: Should new investors buy Berkshire or a low-cost index fund?

AUDIENCE MEMBER: Hello, gentleman. My name is Vivian Pine and I’m from Tarzana, California.

And my question is, for a new investor buying stocks today, would you recommend that they buy a low-cost S&P index fund or Berkshire Hathaway, and why?

WARREN BUFFETT: Well, we never recommend buying or selling Berkshire. But I would say that, among the various propositions offered you, a very low-cost index fund where you don’t put all your money in at one time.

I mean, if you accumulate a low-cost index fund over 10 years with fairly regular sums, I think you will probably do better than 90 percent of the people around you that take up investing at a similar time.

Charlie?

CHARLIE MUNGER: I would agree with that, totally. It’s awkward for us sitting here at these annual meetings where we have a sampling of some of the most honorable and skillful stockbrokers around who’ve done a wonderful job for their own clients and families. But the stockbroking fraternity, in toto, can be guaranteed to do so poorly that the index fund is a better option.