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Here’s how to beat Warren Buffett at investing

Warren Buffett is arguably the greatest investor the world has ever seen. I would not expect to match his record over 50 years.

With his company, Berkshire Hathaway, he has delivered compounded annualised returns of around 20% over the decades.

But, there’s a very simple way you could have outperformed him over the past few years. And that could keep happening.

That simple investment to outperform Warren Buffett is the S&P 500. Don’t believe me? Check out this recent video where in an interview with CNBC he says his own investing within Berkshire Hathaway has underperformed.

On the ASX we can invest in the S&P 500 through iShares S&P 500 ETF (ASX: IVV).

It’s very hard to outperform the S&P 500. It has a good amount of diversification across industries, unlike the ASX. Warren Buffett may find it increasingly difficult to beat the S&P 500 as more of the best businesses are technology-related – a sector he has mostly ignored in the past. Although Berkshire Hathaway is now a large shareholder of Apple.

Technology might be the biggest sector allocation in the S&P 500, but health care, financials, communication and consumer discretionary all have more than 10% allocations of the portfolio.

It’s very hard to say which of Microsoft, Apple, Amazon, Alphabet, Facebook, Berkshire Hathaway, Johnson & Johnson will be the best performer of the year. That’s why it’s good to own a small piece of all of them, as well as the rest of the S&P 500. As a group, they should continue to do well as America’s economy grows.

It’s not just the US that’s growing well of course, most of these businesses operate in many countries across the globe. It’s hard to go wrong with the S&P 500 for diversification.

Warren Buffett himself has said that most of the money that is left to his wife after he passes is going to be invested in a S&P 500 index fund.

Foolish takeaway

Whilst the S&P 500 doesn’t come with franking credits, I think it is one of the absolute best choices for easy investing. Achieving the average market return should still produce a wonderful result over the long-term for people who invest in it.

But, if you want to stick to quality ASX shares that offer a good mix of growth and dividends then these top ASX shares could be what your portfolio needs.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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