Invest Like Warren Buffett With These 3 American Funds

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In Warren Buffet’s recent annual letter to shareholders of Berkshire Hathaway Inc (NYSE:BRK.A, NYSE:BRK.B), the Oracle of Omaha reiterated his well-known love for U.S. equities and his strong belief in the future of America:

Warren Buffett“Though the preachers of pessimism prattle endlessly about America’s problems, I’ve never seen one who wishes to emigrate (though I can think of a few for whom I would happily buy a one-way ticket).

“The dynamism embedded in our market economy will continue to work its magic. Gains won’t come in a smooth or uninterrupted manner; they never have. And we will regularly grumble about our government. But, most assuredly, America’s best days lie ahead.”

In the newsletter made public Saturday, Buffett begins this section on the greatness of the U.S. by asking the question, “Who has ever benefited during the past 238 years by betting against America?”

And in last year’s letter, Buffett famously said he recommends his estate beneficiaries invest in index funds (preferably Vanguard). So in the spirit of Buffett’s belief in America, I give you 3 of the best American funds (not to be confused with the American Funds family of mutual funds, but rather low-cost funds that invest in America and that Buffett might recommend).

Warren Buffett American Funds: Vanguard 500 Index (VFINX)

BVanguarduffett likes America, low-cost index funds, and Vanguard. Combine these three ingredients together and you get Vanguard 500 Index (MUTF:VFINX).

Although VFINX is not exactly considered “a fund that invests like Buffett,” it is one that he would recommend for most investors.

VFINX tracks the S&P 500 Index, which is an American stock index consisting of the largest U.S. companies by market capitalization. Perhaps one of the many reasons Buffett likes index funds like Vanguard 500 Index is that his own Berkshire Hathaway Inc (NYSE:BRK.B) is a top holding (currently No. 6) in the fund. Other top holdings for VFINX include one of Buffett’s “big 4” favorites, Wells Fargo & Co (NYSE:WFC).

It’s difficult to beat it’s cheap expense ratio of 0.17% or $17 per $10,000 invested. However, if you have at least $10,000 to invest, you could buy the admiral shares version of Vanguard 500 Index (MUTF:VFIAX) with rock-bottom expense ratio of 0.05%.

Warren Buffett American Funds: Dodge & Cox Stock (DODGX)


Dodge & Cox Mutual funds 401(k)If you want a solid large-cap value fund that invests like Buffett, you’ll want to take a look at Dodge & Cox Stock (MUTF:DODGX).

DODGX is not a clone of Berkshire, but the management team at Dodge & Cox definitely has a stubbornly patient, long-term value perspective like Buffett.

The fund’s buy-and-hold philosophy is evident in the low 17% turnover, and the portfolio is solidly American with approximately 90% of holdings in North America. Long-term performance reflects the Dodge & Cox management success with a 9.7% 15-year annualized return, which beats 95% of all large-value stock funds.

Top holdings include deep value stocks like Hewlett-Packard Co (NYSE:HPQ) and Capital One Financial Corp (NYSE:COF).

Buffett would also approve of the low expense ratio of  0.52%.

Warren Buffett American Funds: Vanguard Value ETF (VTV)


VanguardFor a rare combination of deep value American stocks, passive management, and dirt-cheap expenses that could earn Buffett’s nod is Vanguard Value ETF (NYSEARCA:VTV).

Over 99% of the portfolio holdings consist of U.S. equities, and the average forward P/E of 15.3 eclipses that of Berkshire’s, which was recently at 16.7.

Top holdings include American value giants Exxon Mobil Corporation (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), and General Electric Co (NYSE:GE).

Short-term performance is average and boring, as should be expected, but long-term performance, as measured by 10-year annualized returns, beats two-thirds of funds in the large value universe.

The passive nature, in combination with the dirt cheap expense ratio of 0.09%, is what gives that performance edge and would no doubt receive the thumbs up from Mr. Buffett.

As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/american-funds-vfinx-dodgx-vtv/.

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