Best ASX ETF? This fund would be Warren Buffett's top pick

Which ASX ETF would Warren Buffett pick today?

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Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett

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There are many, many ASX exchange-traded funds (ETFs) out there. So many that choosing one can be a difficult task. There are ETFs covering every industry, sector or index out there, including bank shares, healthcare shares, silver prices, or battery technology. Not only that, but there are also multiple ETFs that cover the same index. Take the S&P/ASX 200 Index (ASX: XJO). There are at least 3 different ETFs on the ASX that track this index alone.

No wonder the choices can be overwhelming. So it might be a good time to turn to an expert's opinion on this matter. And who better to turn to than the legendary investor Warren Buffett – chair and CEO of Berkshire Hathaway Inc. (NYSE: BRK.A)(NYSE: BRK.B).

Buffett does not invest in ETFs himself. Instead, his company Berkshire Hathaway famously holds a portfolio of blue chip US shares, such as the Coca-Cola Co (NYSE: KO) and Apple Inc (NASDAQ: AAPL).

It's the S&P 500, silly

But he has spoken about which ETF he likes the most. And his advice is unequivocal. In his 2014 letter to the shareholders of Berkshire Hathaway, Buffett stated the following on where he wants his money invested when it sadly comes time for him to shuffle off this mortal coil:

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. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.

So there you have it. Warren Buffett's favourite ETF is an S&P 500 index fund, preferably from Vanguard.

Our Fool colleagues over in Buffett's home country also have some quotes from Buffett that supplement the quote above:

  • Just pick a broad index like the S&P 500. Don't put your money in all at once; do it over a period of time.

  • Among the various propositions offered to you, if you invested in a very low cost index fund — where you don't put the money in at one time, but average in over 10 years — you'll do better than 90% of people who start investing at the same time

Taking what Buffett has called a "slice of America", the S&P 500 Index invests in 500 of the largest companies on the American markets.

What would Buffett's ASX ETF pick be?

Unfortunately, here on the ASX, we don't have a Vanguard S&P 500 ETF. Although there is a similar fund in the Vanguard US Total Market Shares Index ETF (ASX: VTS), which invests in a larger pool of US companies than the S&P 500 does.

However, there is an S&P 500 ETF on the ASX, the iShares S&P 500 ETF (ASX: IVV), which is provided by BlackRock. This ETF tracks the S&P 500 in all its glory, charging a management fee of 0.04% per annum to do so.

This ETF is not hedged to Australian dollars though, meaning that its value can be affected by fluctuations in the Aussie dollar/ US dollar exchange rate. There is also the iShares S&P 500 (AUD Hedged) ETF (ASX: IHVV) though, which removes this variable for a 'purer' S&P 500 exposure.

Judging by Warren Buffett's comments above, we might have found what theoretically could be his favourite ASX ETF if he was forced to choose an investment down under here on the ASX.

Motley Fool contributor Sebastian Bowen owns shares of Coca-Cola. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple, Berkshire Hathaway (B shares), and iShares Trust - iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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