Start your year off right with the Surefire Warren Buffett Index Fund, which can turn $200 a month into $76,000.

Warren Buffett is famous for his ability to pick great stocks and win on those investments over time. As Chairman Berkshire HathawayHe helped achieve compounded annual returns of approximately 20% over 57 years. S&P 500‘S (SNPINDEX: ^GSPC) A compounded increase of approximately 10% was achieved. So, if you want to follow in the footsteps of billionaire investors, you might think that perfecting your stock-picking skills is your only option.

But there’s actually another, much easier option that Buffett supports. The Oracle of Omaha also follows this advice directly. I’m talking about investing in a fund that tracks the S&P 500 index. Berkshire Hathaway owns two of them. SPDR S&P 500 ETF Trust (spy 0.07%) and Vanguard S&P 500 ETF (flight 0.05%). According to Buffett, investing regularly in one of these funds over time can help you accumulate significant wealth. Let’s take a closer look at this top investor’s advice and how to apply it.

Buffett’s Advice

Buffett has made most of his wealth by picking individual stocks, but he admits this is often difficult. And in Berkshire Hathaway’s 2013 letter to shareholders, Buffett suggested a way to solve this problem.

He wrote: “The layperson’s goal should not be to pick winners, but to own multiple business units that can succeed overall. A low-cost S&P 500 index fund achieves this goal.”

The S&P 500 index fund contains members of its benchmark and thus tracks the performance of the index from year to year. As Buffett said, this fund brings together a variety of companies. And as you can see from the composition of the index and the specific fund, I will use the SPDR fund here. Investing in these products gives you exposure to some of the world’s best companies.

The top five holdings in the SPDR S&P 500 ETF, mirroring the S&P 500 Index, are:

preferred technology

This clearly favors technology, which accounts for more than 28% of the fund and the S&P 500 index. This is not surprising, as indices reflect what powers the economy at any given time, and are key to the growth of the indices and funds that track them.

But it’s still fair to say that S&P funds provide broad exposure to all kinds of companies, including healthcare, financials, and consumer discretionary, with double-digit holdings. Finally, several other industries, including industrials and energy, make up the remainder of the fund and index.

So by buying an index fund, you’re investing in a broad range of stocks, and as history shows, you’re more likely to win over the long term. The average annual return on the stock market over the past 50 years has been 10%.

the magic of synthesis

Now let’s put this to work. All of this means that if you invest $200 a month in the SPDR S&P 500 ETF over the next 15 years, your investment could be worth $76,254. That’s thanks to compound interest, the idea that profits will generate more profits over time.

You will contribute $36,000 and earn over $40,000 over that period. And the only thing you had to do was make a monthly donation. Of course, you can increase or decrease this contribution depending on your budget, and investing even a small amount can yield excellent returns over the long term.

Keep in mind that this is just a model that assumes a 10% annual return over time. No one can predict what the stock market will do, and it’s been known to surprise us. However, it makes sense to be optimistic about long-term investing because the general market has consistently shown that it always beats bear markets and continues to rise over time.

^SPX data from YCharts

That’s why it’s a good idea to invest in funds that track this performance.

Finally, here is another important piece of advice from Warren Buffett: Invest in low-cost index funds. The SPDR S&P 500 ETF is a good fit since its P/E ratio is around 21.

So whether you’re an established stock picker or a new investor, committing to a monthly index fund contribution can be a great way to kick off 2024 and pave the way to wealth.