Warren Buffett's Instructions for His Wife's Inheritance Are 90% Stocks and 10% Bonds. Here's How That Mix Has Done Since 2000.
The bond piece cost around $92,000 on a $100,000 stake since 2000. Was it worth it when stocks crashed?
Warren Buffett offered specific instructions for how his wife should allocate her inheritance in 2013. He suggested 90% should be invested in a low-cost S&P 500 index fund and 10% in short-term government bonds. To test this plan, the S&P 500 index (replacing the fund due to its late start) and three-month Treasury bills were used as alternatives.
Over 27 years since 1999, the 90/10 mix would have grown to about $727,000, or 7.67% annually, compared to the index's $819,000, or 8.15% annually. The mix lagged the index in most years but outperformed by around a third of a percentage point over the long term. It did better during market downturns, losing around 10% to 16% less than the index in losses.
While the mix wouldn't outperform the index for a long-term buy-and-hold strategy, it could be a reasonable choice for money that needs to cover expenses during a market crash.
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