Buy This S&P 500 ETF and Profit Like Buffett

For solid returns with minimal effort and low cost, buy an S&P 500 ETF. Legendary investor Warren Buffett agrees.

S&P 500 ETFOn Monday Buffett advised professional basketball player LeBron James in a CNBC interview to keep it simple and invest in low-cost index funds.

"Owning a piece of America, a diversified piece, bought over time, held for 30 or 40 years, it's bound to do well," said Buffett. "The income will go up over the years, and there's really nothing to worry about."

It's not the first time Buffett has recommended this type of investment.

"A low-cost index fund is the most sensible equity investment for the great majority of investors," Buffett once told index-investing pioneer Jack Bogle.

He even recommended this "keep it simple" tactic to his own survivors and trustees.

"My advice to the trustee couldn't be more simple," Buffett said in his March 2014 annual letter to Berkshire Hathaway Inc. (NYSE: BRK.A) shareholders. "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)."

The Oracle of Omaha said this strategy will provide better long-term results than those achieved by investors using high-fee managers.

Here are the kind of returns investors can get with an S&P ETF, plus one to buy to follow Buffett's lead...

S&P 500 Stocks Are "Best in Breed"

In February the S&P 500 Index rose 5.5% for its best month in more than three years. It's up 2.1% year to date and headed higher over the long term.

"For the year ahead, I'm projecting a 7% gain for the S&P 500," Money Morning's Tech Specialist Michael A. Robinson said back in December. "I'm basing that on the U.S. economy's recent strong performance - and I'm being conservative."

In a note titled "10 Reasons to Stay Long the S&P 500," Bank of America strategist Saviata Subramanian said S&P 500 companies' balance sheets are healthy, with plenty of cash. Many components pay dividends that trounce returns on Treasuries.

S&P 500 stocks are the world's "best-in-breed," Subramanian added.

Now here's the best S&P 500 ETF to buy to profit from the S&P's future gains...

The Best S&P 500 ETF: Vanguard 500 Index Fund

[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]The goal of the Vanguard 500 Index Fund (NYSE Arca: VOO) is to track the performance of the S&P 500 Index as closely as possible.

The fund buys all (or a representative sample) of the stocks in the index. As such, it gives investors exposure to hundreds of securities in a single fund.

That means the Vanguard comes with lower risk than investing in a single stock or a fund with a narrower focus.

The key risk for the fund is the volatility that comes with its full exposure to the stock market. But because VOO is broadly diversified within the large-cap market, it can be considered a core equity portfolio holding.

The fund holds investments until the index itself changes, so management and transaction costs are low. The fund's expense ratio is only 0.05%. That's 95% lower than the average expense ratio of funds with similar holdings, according to Morningstar.

Because it doesn't trade as actively as managed funds might, it also generates less taxable income, thus reducing the drag on investment.

Since VOO's debut on Sept. 7, 2010, it has returned 18.23%. The S&P 500 has returned 18. 27% during that time. A $10,000 investment in this S&P 500 ETF made at its launch would be worth $21,164.45 today.

When Interest Rates Rise, Who Benefits Most? The Federal Reserve recently changed the tone of its stance on rates, indicating we could see little change into this summer or fall before it dials the rate needle upward. But when rates do rise, brokers will be the biggest beneficiaries. Here's how to play the big brokerage firms when rates rise...

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