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Why Warren Buffett is Holding Cash and NOT Investing in S&P 500 Index Fund

Warren Buffett and Charlie Munger explain why they are holding so much cash instead of being fully invested by putting the reserves into the main stock market index S&P 500. “Why has Buffett stopped buying stocks?” is the question many investors ask themselves these days when thinking about the stock market situation with its current valuations. Let's see the view of the greatest investors of all time on this subject!

The question goes: “Warren, you are a big advocate of index investing, and of not trying to time the market. But by your having Berkshire hold such a large amount of cash in T-bills, it seems to me you don't practice what you preach. I'm thinking that a good alternative would be for you to invest most of Berkshire's excess cash in a well-diversified index fund until you find an attractive acquisition or buy back stocks. Had you done that over the past 15 years, all the time keeping the $20 billion cash cushion you want, I estimate that at the end of 2018, the company's 112 billion balance in cash, cash equivalents, in short-term investments and T-bills, would've instead been worth about 155 billion. The difference between the two figures is an opportunity cost equal to more than 12 percent of Berkshire's current book value. What is your response to what I say?”
From Berkshire Hathaway Annual Shareholders Meeting. (2019)

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