What is Buffett's 90/10 rule?

Written by Editorial Team | Last Updated: August 2026

Warren Buffett’s 90/10 rule refers to a specific piece of investment advice he included in a letter to shareholders for his estate. He recommended that the cash portion of his wife’s inheritance be invested in a very low-cost S&P 500 index fund, while 10 percent should be invested in short-term government bonds. This strategy is a testament to his philosophy on passive investing, suggesting that for most individual investors who do not have the time or expertise to actively research and select individual stocks, a simple, low-cost indexing approach is the superior method for long-term wealth accumulation. The rule underscores the importance of minimizing fees, maintaining diversification across the largest and most successful American companies, and avoiding the trap of trying to "beat the market" through frequent trading or speculation. It is considered a cornerstone of his practical, long-term approach to retirement planning and asset allocation for those who prioritize security, growth, and simplicity over high-risk active management.

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