History’s greatest master class on investing is about to shut down.
On Dec. 31, Warren Buffett will hand over the Berkshire Hathaway CEO job to vice chairman Greg Abel. Now, as Buffett’s 60 years of running Berkshire come to an end, it’s time to assess his performance.
Brace yourself.
If you had put $1,000 into the S&P 500 index at the beginning of those 60 years, you’d now have $441,196—a tremendous reward for doing nothing. But if you had put your $1,000 into Berkshire stock, you would now have a truly incredible $59,681,063. Another way to think of it: If you had invested $20,000 back then, you would today be a billionaire. Without doing a thing.
As astonishing as the numbers are, another facet of Buffett’s career is at least as remarkable. Through it all, he has happily, exuberantly told the world exactly how he does it. He holds no investing secrets. In speeches, interviews, and his annual letters to Berkshire shareholders, he has explained what he looks for, what he ignores, and how he thinks. Buffett bought his first stock (Cities Service Preferred, the oil and gas company known today as Citgo) when he was 11 years old, and he will retire at age 95. So here we offer 84 years of investment wisdom, condensed and explained—Buffett’s five top rules of investing:
Rule No. 1: Don’t even try to pick stocks like Buffett. Stick with an S&P 500 index fund plus some short-term treasuries
Buffett has insisted for decades it’s the best way for average investors to invest. Few can spend many hours a week analyzing stocks. Buying managed mutual funds in which professionals choose stocks may seem a good alternative, but it isn’t. Research has long found that over 10-year spans, most managed funds underperform the market. A few managed funds still outperform the market over the long run, but they aren’t the same funds from decade to decade, and identifying the few winners in advance has proved impossible.
Buffett’s solution: Put 90% of your portfolio into buying the market. By regularly investing in a broad index fund, Buffett has said, “the know-nothing investor can actually outperform most investment professionals.” The other 10% of your portfolio should be in short-term Treasury bills as a steady cash buffer so you needn’t sell stocks if you unexpectedly require money.
But suppose you’re absolutely set on following Buffett and discovering fantastic individual stocks. He has said if you’re a nonprofessional investor who likes spending six to eight hours a week working on investments, then do it (though Buffett works on it more than eight hours every day). In that case…
Rule No. 2: If you’re going to pick stocks, don’t pick many of them
The more stocks you buy, the more your portfolio starts to look like the market. Buffett’s portfolio as of June 30, 2025, (most recent data) was worth $257 billion, and just four stocks—Apple, American Express, Bank of America, and Coca-Cola—accounted for 63% of the portfolio’s value.
That’s risky, which is the point. Successful stock pickers must summon the courage to invest large amounts of money in a few stocks. Buffett, blunt as always, has said, “Diversification is protection against ignorance. It makes little sense if you know what you are doing.” A corollary is that you shouldn’t expect to make many picks in your whole life. “I always tell the students in business school they’d be better off when they got out of business school to have a punch card with 20 punches on it,” he once told an audience at Notre Dame. “And every time they made an investment decision, they used up one of those punches.” The reality, he said, was that “they aren’t going to get 20 great ideas in their lifetime. They’re going to get five or three or seven. And you can get rich off five or three or seven.”
Rule No. 3: Buy stocks you’d be happy owning if you knew the stock market would close for 10 years
That’s a measure of your confidence. It’s also a reminder to think long-term. No companies, not even Buffett’s forever stocks, can evade mistakes and unpredictable shocks that send a stock plunging. Yet through ups and downs he has held Coca-Cola for 37 years, American Express for 34 years, Bank of America for 14 years, and Apple for nine years—steadily profiting from the rebounds that followed their stumbles.
“You don’t need a lot of brains to be in this business. What you do need is emotional stability. You have to be able to think independently.”
Warren Buffett, CEO, Berkshire Hathaway
Arguably the most inspiring example of staying with a stock through ups and downs is Berkshire Hathaway itself. Its stock underperformed the S&P in six of its first 11 years. Some original stockholders might have felt that was more excitement than they wanted and sold their shares, but those who held on are rich. Buffett says he knows of Berkshire stockholders, unheard-of by the public, who are billionaires entirely from holding their shares for decades.
Rule No. 4: Invest in companies with a “moat”—a durable competitive advantage
It can be a powerful worldwide brand (like American Express) or low costs (Geico, which Berkshire owns entirely), and the moat must be widening over time. That’s because, as Buffett says, “competitors will repeatedly assault any business ‘castle’ that is earning high returns.” In his quest for wide-moated castles, he rules out entire industries that are “prone to rapid and continuous change,” he says.
Still, every industry changes eventually, sometimes in ways that drain a moat dry. For example, in 1986 Berkshire bought World Book Encyclopedia, which Buffett said had “a real moat” with its powerful brand. By 1995, with CD-ROMs and then the internet rising, he was calling it “Berkshire’s biggest problem.” Berkshire still owns the business, but it’s nothing like the profit machine Buffett had hoped for—a reminder that no one bats a thousand.
Rule No. 5: Be greedy when others are fearful and fearful when others are greedy
That may be Buffett’s most famous advice. It seems so obvious, but following it requires more courage than most people possess. Latest example: UnitedHealth Group, America’s largest health insurer and health care company. Its stock plunged from a near all-time high of $600 to $312 in this year’s second quarter, and during that quarter—government disclosures don’t say exactly when—Berkshire bought 5 million shares. Now, in the Buffett system, it’s time to be patient.
One more thing: Regular investors actually have an advantage over the greatest investor of all time
Those five rules are sound and proven. They’ll greatly help anyone who follows them over time. But it must be said: Follow all those rules religiously for years, get rich, and your chances of approaching Buffett’s astonishing record will still be near zero. That’s because he had an extremely early head start, and if your age is in double digits, you’re already behind.
Buffett’s childhood obsession with making money, which began around age 5, produced more than charming stories. By his teens he was accumulating serious business savvy and grownup capital that enabled him to keep investing, accruing more gains, and investing more. As his biographer, Alice Schroeder, wrote in The Snowball: Warren Buffett and the Business of Life, “No one else in high school was a businessman.”
He delivered newspapers (500,000 in total, he later calculated), bought refurbished golf balls and sold them at a profit, sold sets of stamps to collectors, invested in farmland and shared the earnings with a tenant farmer. He bought a pinball machine with a friend and put it in a barbershop, then bought another machine with the money from the first one, and then bought still more. By age 16 he had $5,000, which is about $78,000 in today’s money. Unlike most of us, he knew by then that investing would be his life’s work, and he was well on his way.
If you’re starting to feel inadequate comparing your own pathetic self against Buffett, cheer up. He has a comforting observation for you: You needn’t be a Mensa member to invest brilliantly. Buffett’s IQ, never publicly stated, is rumored to be 150. If so, that means he’s smarter than 99.9957% of the population. But, he has said, “You don’t need a lot of brains to be in this business. What you do need is emotional stability. You have to be able to think independently.”
And yes, Buffett envies you. In one way, and probably only one way, you have an advantage over him. To move the needle when adding to his colossal stock portfolio, he must buy gigantic volumes of a company’s shares, and pushing mountains of money toward one stock raises the price before he can buy all the shares he wants at the price he found so alluring. You, however, are almost certainly not moving markets. For an investor, he told BusinessWeek in 1999, it’s “a huge structural advantage to not have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”
Berkshire shareholders have never needed to study Buffett’s investing magic. They could just buy Berkshire stock and let him do the work, with spectacular results. But that option evaporates on Jan. 1, 2026, leaving the great question: Is Berkshire Hathaway so immersed in Buffett’s way of investing that his successors will carry it on institutionally? Or is Buffett unique in so many ways that Berkshire can never hope to continue his staggering performance?
Buffett’s 1977 letter to shareholders may suggest an answer. He described the criteria of a truly great, enduring business, as understood by him and his longtime business partner, Charlie Munger. The criterion of “enduring,” he wrote, “eliminates the business whose success depends on having a great manager…Of course, a terrific CEO is a huge asset for any enterprise…But if a business requires a superstar to produce great results, the business itself cannot be deemed great.”
Buffett is obviously a superstar, and it’s hard to see any inherent factors, other than Buffett, that have made Berkshire Hathaway so hugely successful. He seems to have chosen excellently with Abel and Berkshire’s other top executives. But the world won’t know how good they really are until they’re on their own.
Has Buffett picked a successor as superbly as he picks stocks? After 60 years, it’s the hardest call Berkshire’s shareholders have ever had to make.
This article appears in the December 2025/January 2026 issue of Fortune with the headline: “How to invest like Warren Buffett.”
