S&P 500: Historical Returns, Buffett Advice & Is It Good Now?

Warren Buffett spent nearly six decades quietly outperforming the benchmark index he now recommends to everyday investors — yet the S&P 500 has outpaced Berkshire Hathaway in recent years, flipping the script on the Oracle of Omaha’s legendary edge. For anyone deciding between active management and passive index funds, that reversal carries real weight.

Companies Tracked: 500 · U.S. Equities Coverage: 80% · Index Symbol: SPX · Yahoo Ticker: ^GSPC · Managed By: S&P Dow Jones Indices

Five key facts about the S&P 500 that put Buffett’s performance in context and clarify what the index means for your portfolio.

What if I invested $1000 in the S&P 500 20 years ago?

Put $1,000 in an S&P 500 index fund twenty years ago and you’d be looking at roughly $6,000–$7,000 today before inflation — assuming you held steady through the dot-com crash, the 2008 financial crisis, and COVID-19 volatility. That compounds to about 10% annually over the long haul, according to Berkshire Hathaway’s official performance record.

Historical performance calculation

Historical data from Slickcharts (Financial data aggregator) shows annual returns that swing dramatically:

• 1965: Berkshire +49.5% vs. S&P 500 +10.0%
• 1976: Berkshire +129.3% vs. S&P 500 +23.6%
• 1985: Berkshire +93.73%
• 1989: Berkshire +84.57%
• 2023: Berkshire +15.8% vs. S&P 500 +26.3%

The pattern reveals something counterintuitive: even the world’s greatest investor underperformed for extended periods yet still generated extraordinary long-term gains.

Factors influencing returns

Three forces shape what you’d actually earn: timing of your initial investment, dividend reinvestment discipline, and the psychological ability to hold during drawdowns. Kernel Wealth (Investment analysis) documents how $100 invested in Berkshire at the end of 1968 grew to over $850,000 by 2018 versus $11,000 in the S&P 500 — but that gap required holding through decades of volatility.

Is the S&P 500 still a good investment?

The S&P 500 remains the default engine of American retirement portfolios for one straightforward reason: it captures 80% of U.S. equities by market cap. Whether it’s the “right” investment depends entirely on your time horizon and whether you can stomach the inevitable downturns.

Current market conditions

As of 2025, concentration risk has intensified. The so-called “Magnificent 7” — Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla — represent an outsized share of index performance. Tickeron (Investment analysis) notes that Berkshire’s portfolio focuses on financials, Apple, and consumer staples, partly as a hedge against tech-heavy concentration.

Long-term track record

The numbers still favor passive investors. Over 58 years (1965–2023), the S&P 500 delivered a compounded annual gain of 10.2% — enough to turn $10,000 into roughly $295,000 before inflation. That’s documented in Berkshire Hathaway’s annual report, which Buffett himself has used to compare his own track record.

What does Warren Buffett say about the S&P 500?

Buffett has been remarkably consistent: for most investors, a low-cost S&P 500 index fund beats trying to pick winners. His reasoning blends mathematical logic with pragmatic humility about the difficulty of beating markets consistently.

Buffett’s recommendations

In his 2019 letter to shareholders, Buffett laid out the case directly. He estimated that a “$1 trillion” rollover from active funds into index trackers would leave investors collectively richer by billions annually through lower fees alone. Portseido (Portfolio analysis) captures his core thesis: “This shows that over certain long-term periods, a simple index fund can outperform even the world’s greatest stock picker.”

S&P 500 vs other investments

Buffett has also repeatedly contrasted index funds favorably against alternatives his shareholders might consider. In his view: gold produces nothing and generates storage costs; bonds offer safety at the cost of inflation erosion; and active stock picking — his own profession — demands research capabilities and emotional discipline that most people lack.

Warren Buffett, 2020 Shareholder Letter“I’ve advised my trustee to put 10% of my wife’s trust into short-term government bonds and 90% into a very low-cost S&P 500 index fund.” — Warren Buffett

How much was $10,000 invested in the S&P 500 in 2000?

If you invested $10,000 in an S&P 500 index fund at the peak of the dot-com bubble in March 2000, you’d have weathered a 49% drawdown by October 2002, watched your money stagnate through 2007, lost another 57% in 2008–2009, and then climbed steadily to roughly $50,000–$60,000 by 2025. The compounding math worked despite two once-in-a-generation crashes.

Return since 2000

According to Slickcharts (Financial data aggregator), the S&P 500 returned 26.3% in 2023 alone — but that followed Berkshire’s 15.8% return that same year. The index moved ahead in 2023 while Berkshire lagged for only the fourth time in memory. Portseido (Portfolio analysis) calculated that from 2013 through August 2025, the S&P 500 actually outpaced Berkshire at 12.03% annualized versus 10.87%.

Lessons from market timing

That 2000 investor who sold during the dot-com crash or the 2008 crisis would have locked in losses and missed recovery. Moneysukh (Investment education) emphasizes Buffett’s principle: the power of compounding rewards discipline over market timing. A $10,000 investment held through both crashes and crashes alone generated roughly 500% total return.

Why shouldn’t you just invest in the S&P 500?

Despite Buffett’s endorsement, the S&P 500 isn’t a universal solution. Concentration in large-cap U.S. tech, currency exposure for international investors, and the psychological difficulty of watching a single index dominate your net worth — these are genuine trade-offs worth acknowledging honestly.

Limitations and risks

Six considerations make index-only investing incomplete for some portfolios:

• Sector concentration: The Magnificent 7 can pull the index up or drag it down disproportionately
• Currency risk: International investors holding U.S. dollars face exchange-rate volatility
• No downside protection: Index funds offer no cushion during bear markets beyond the underlying stocks
• Passive captures average: You receive market returns — meaning half of all investors beat you before costs
• Tax inefficiency: Index funds generate taxable events on rebalancing that active tax management could reduce
• Zero real return risk: Over very long periods, nominal returns can fail to outpace inflation

Diversification needs

A balanced portfolio typically includes bonds for stability, international equities for geographic diversification, and potentially alternatives like real estate or commodities. Kernel Wealth (Investment analysis) notes that Berkshire’s own strategy evolved from buying low-cost companies to acquiring high-quality businesses with durable competitive advantages — an approach individual investors cannot simply replicate with an index fund.

How to invest in the S&P 500

Putting money into an S&P 500 index fund takes about 15 minutes and requires nothing more than a brokerage account. The process splits into two broad paths depending on whether you’re investing in a tax-advantaged retirement account or a taxable brokerage.

Step-by-step process

1. Open a brokerage account. Major platforms like Fidelity, Schwab, and Vanguard offer S&P 500 index funds with no account minimums. Choose a firm that provides the specific fund you want — some investors prefer ETFs like SPY or VOO for their liquidity, while others favor mutual fund versions for automatic investing.
2. Select your fund. The three most widely held S&P 500 index vehicles are Vanguard’s VFIAX (mutual fund), Vanguard’s VOO (ETF), and State Street’s SPY (ETF). All track the index with expense ratios below 0.1%.
3. Set your contribution amount. Even $100 monthly through dollar-cost averaging smooths entry points over time. Slickcharts (Financial data aggregator) shows historical returns that reward consistent investing over lump-sum timing attempts.
4. Automate deposits. Set up recurring contributions to your chosen fund. This enforces the discipline Buffett advocates and removes emotional decision-making from the equation.
5. Hold through volatility. The historical 10% annual return only materializes for investors who remain invested through crashes. Rebalancing annually to maintain your target allocation prevents drift without triggering unnecessary taxes.

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Frequently asked questions

For investors who want exposure to America’s largest companies without picking individual stocks, the S&P 500 index remains the most straightforward path — and the evidence suggests that most people who simply commit and hold will outperform those who spend their energy looking for something better.