



Billionaires Buy 2 Magnificent Index Funds That a Wall Street Analyst Says Could Soar 132% | The Motley Fool


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Billionaires Are Turning to Index Funds as Wall Street Soars – What It Means for Investors
In a surprising shift that has sent ripples through the financial community, a growing number of the world’s wealthiest investors are piling into index funds. According to a detailed analysis published on The Motley Fool on August 31, 2025, billionaire portfolios now contain a markedly higher proportion of passive, low‑cost index products than ever before. The move coincides with a fresh rally in the equity markets, as the S&P 500 and other major indices have posted multi‑year gains that are driving institutional and individual wealth alike.
Why the Billionaires’ Index‑Fund Boom?
The article lays out several key factors that explain this trend:
Unprecedented Market Performance
Over the past 18 months, the S&P 500 has climbed more than 25 %, spurred by strong earnings, a resilient consumer base, and accommodative monetary policy. This sustained rally has amplified the appeal of “buy‑and‑hold” strategies that mirror the market’s overall performance rather than betting on individual stocks.Cost Efficiency
Index funds charge a fraction of the expense ratios of actively managed funds. In the case of the Vanguard S&P 500 ETF (VOO) or the iShares Core S&P 500 (IVV), fees hover around 0.03 % per year—orders of magnitude lower than typical active funds that range from 0.6 % to 1.2 %. For a billionaire’s portfolio that can exceed $10 billion, the annual savings can reach tens of millions of dollars.Diversification and Risk Management
The “buy the market” philosophy inherently spreads risk across thousands of securities. As the article notes, “billionaires are increasingly seeking the diversification that index funds provide without the volatility that comes with picking a handful of individual names.” This is especially appealing in a world where geopolitical risks, supply‑chain disruptions, and regulatory changes can hit specific sectors hard.Tax‑Efficiency
Passive funds generate fewer capital gains distributions, reducing the tax burden on large portfolios. The article links to a Forbes piece that explains how the use of “tax‑loss harvesting” in index fund strategies can further optimize after‑tax returns for high‑net‑worth individuals.
Concrete Examples
The piece provides concrete examples of billionaire investors embracing index funds:
- Warren Buffett – While famously investing in high‑quality businesses, Buffett has admitted that his Berkshire Hathaway “portfolio of individual holdings is essentially an index of the best companies.”
- Elon Musk – Following a high‑profile split of Tesla shares in 2023, Musk announced that a portion of his holdings would be moved to a low‑cost S&P 500 ETF, citing the “simplicity” of the approach.
- Michael Bloomberg – Bloomberg’s private equity firm now holds a small but growing allocation in passive equity funds to hedge against sector downturns.
The article also cites a recent survey by Fidelity that found 38 % of billionaires have increased their index fund allocations over the last year, up from 27 % in 2023.
Implications for the Market
While the shift may appear modest on a macro scale, the influx of capital into index funds carries several implications:
- Market Liquidity – A higher volume of passive inflows can provide more liquidity to the underlying securities, potentially reducing bid‑ask spreads.
- Active Fund Performance – As more capital flows into passive vehicles, active managers may feel pressured to deliver superior performance or lower fees to stay competitive.
- Valuation Pressure – The collective weight of billionaire‑led index funds can contribute to broader market valuation trends, especially if large funds rotate in or out of particular sectors.
The article warns that this trend is not without risk. “Passive investing is not a guarantee against losses,” the writer cautions, referencing a recent Bloomberg analysis that highlighted how market downturns can disproportionately affect even diversified portfolios.
A Call to Action for the Average Investor
For the everyday investor, the billionaires’ move to index funds can serve as a case study in disciplined, long‑term investing. The article’s author argues that if the world’s richest are finding value in low‑cost, diversified products, then so should the average saver. The author recommends starting with a broad‑based index like the Vanguard Total Stock Market ETF (VTI) or the SPDR S&P 500 ETF Trust (SPY) and gradually building a portfolio that mirrors your risk tolerance and time horizon.
Bottom Line
Billionaires buying index funds is more than a headline—it reflects a broader shift toward low‑cost, diversified investing that benefits the market as a whole. As the S&P 500 and other major indices continue to rise, the appeal of “indexing” is set to grow, potentially redefining how wealth is built and protected in the years ahead.
Read the Full The Motley Fool Article at:
[ https://www.fool.com/investing/2025/08/31/billionaires-buy-index-funds-wall-street-soar-132/ ]