Hassle-Free Investing: The 90/10 Strategy à la Warren Buffett

JAKARTA, KOMPAS.com - Amid rising public interest in investing, particularly among retail investors, a fundamental question arises: must investment strategies be complex to yield optimal profits? For veteran investor and one of the world’s richest individuals, Warren Buffett, the answer is quite the opposite. Through what is known as the 90/10 method, Buffett offers a simple, inexpensive, and long-term-based approach, a strategy specifically designed for retail investors. Quoted from Investopedia on Friday (17/4/2026), the 90/10 method is a highly straightforward asset allocation strategy. Buffett recommends that investors allocate 90% of their portfolio to a low-cost stock index fund and the remaining 10% to short-term government bonds. This strategy was first revealed in Buffett’s 2013 letter to Berkshire Hathaway shareholders. Indeed, Buffett advised the same approach for his family’s inheritance fund. This approach stems from two main assumptions. First, the stock market tends to rise in the long term alongside economic growth. Second, most investors cannot consistently outperform the market through individual stock selection. In the 90/10 strategy, the largest portion is placed in low-cost equity mutual funds. These instruments reflect overall market performance, rather than relying on the performance of one or a few stocks. By choosing equity mutual funds, investors are automatically diversified across hundreds of large companies. This reduces specific stock risks while providing broad exposure to economic growth. Additionally, costs are a crucial factor. Buffett has consistently criticised the high fees of active investment managers. In his letter to Berkshire Hathaway shareholders, he emphasised the importance of selecting instruments with low fees so that returns are not eroded by charges.