There isn't one unique path to becoming a billionaire. Today's top investors have built their fortunes by investing in a variety of companies -- some focusing on high-growth technology players and other favoring dividend-paying stalwarts of the American economy.
That's just to mention two strategies, but there are many more. Even the number of holdings often varies greatly. For example, Warren Buffett's Berkshire Hathaway holds about 40 positions, while Ken Griffin's Citadel invests in thousands of stocks.
But sometimes, these market-savvy billionaires agree on certain investments, and in the case of Buffett and Griffin, one particular holding stands out. These two famous investors are known for their stockpicking skills, yet this asset, which appears in both of their portfolios, doesn't require those talents.
At the same time, this investment is known to increase over time, so it's likely to grow the billionaires' wealth without them lifting a finger. Is it right for you, too?
Image source: Getty Images.
Tracking the S&P 500
The investment I'm talking about is the SPDR S&P 500 ETF Trust (SPY +0.78%), an exchange-traded fund that tracks the performance of the S&P 500. ETFs are funds that focus on a particular theme, such as pharmaceutical or tech stocks, or aim to replicate the performance of an index. They trade daily, so you can buy them as you would a stock. One thing to be aware of is they do involve fees, so to minimize your costs, be sure to choose one with an expense ratio of less than 1%.
The SPDR S&P 500 ETF, with an expense ratio of 0.09%, easily makes it into our good value criteria -- as I would expect from a Warren Buffett investment since this top investor is known for favoring value.
So why do Buffett and Griffin -- both excellent at picking out the next winning stock -- agree on holding shares of the SPDR S&P 500 ETF? A look at Griffin's holdings shows he's bullish on the top stocks powering the U.S. economy today, with significant positions in companies including Nvidia, Microsoft, and Meta Platforms, for example. And these companies are among the top holdings of the SPDR S&P 500 ETF, so by investing in the ETF, Griffin reinforces his bet on today's leaders. He even increased his position in the SPDR S&P 500 ETF in the most recent quarter by more than 120%.
Buffett is known for his belief in the American economy. In his 2013 shareholder letter, he said that a good S&P 500 fund is likely to achieve better returns than those generated by most investors. Unlike Griffin, Buffett isn't heavily invested in tech stocks, the players that have in recent times led market gains. In fact, his only significant tech investment is in Apple, his biggest position by value. But Buffett is benefiting through his position in the SPDR S&P 500 ETF.
NYSEMKT: SPY
Key Data Points
Should you follow the billionaires?
So, should you follow Griffin and Buffett into this top ETF? Regardless of your investment strategy, the answer is yes, and here's why.
The SPDR S&P 500 ETF offers you exposure to all of today's leading companies, giving you the opportunity to benefit from their victories. At the same time, thanks to the sheer number of stocks in the fund, your risk of losses is limited.
On top of this, the S&P 500's track record shows us that, over time even after bear markets, the index has gone on to recover and advance. And it's likely this pattern will continue.
This means an investment in an ETF that tracks this performance is likely to score a long-term win for you, too. It's also important to remember that the S&P 500 -- and ETFs that track it -- are flexible, adding and subtracting members to reflect the current economy's powerhouses. By investing in the SPDR S&P 500 ETF, you'll always have exposure to the key companies of the times.
This doesn't mean you should stop picking stocks, though. Like Ken Griffin and Warren Buffett, you can blend these two strategies, selecting some of your favorite companies for your portfolio and adding some shares of the SPDR S&P 500 ETF to complete the picture. Then, like these top investors, you may potentially grow significant wealth over time.
