I’ve spent years studying investment strategies, and one question keeps coming up: Are there mutual funds that follow Warren Buffett’s approach? It’s not just curiosity. I want to know if I can invest in a fund that mirrors the principles of one of the most successful investors in history—without having to pick stocks myself.
Buffett’s strategy isn’t complicated on the surface. He buys high-quality businesses at reasonable prices, holds them for the long term, and avoids speculation. His company, Berkshire Hathaway, has delivered an average annual return of about 19.8% since 1965, compared to the S&P 500’s 10.2% over the same period [1]. That kind of outperformance is rare and compelling.
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What Exactly Is Warren Buffett’s Investment Philosophy?
Before I look for funds that follow Buffett, I need to understand what he actually does.
Buffett follows value investing, a method popularized by Benjamin Graham. The core idea is simple: buy stocks trading below their intrinsic value. Intrinsic value is what a business is truly worth based on its earnings, assets, and long-term cash flows—not what the market says it’s worth today.
He looks for companies with durable competitive advantages—what he calls “economic moats.” These are businesses that can maintain high profits over time because of brand strength, cost advantages, network effects, or regulatory protection.
Buffett also emphasizes low turnover. He famously said, “Our favorite holding period is forever.” This means he avoids frequent trading, which reduces taxes and transaction costs.
He prefers businesses he understands—no speculative tech startups or cryptocurrency. And he insists on strong management teams with integrity and shareholder alignment.
Finally, he maintains a margin of safety. That means he only buys when the price is significantly below his estimate of intrinsic value. The formula for margin of safety is:
\text{Margin of Safety} = \frac{\text{Intrinsic Value} - \text{Market Price}}{\text{Intrinsic Value}}If a stock is worth $100 but trades at $70, the margin of safety is 30%. That buffer protects against errors in estimation or market downturns.
Can Mutual Funds Emulate This Strategy?
Mutual funds pool money from many investors and hire managers to pick stocks. Most funds are actively managed, meaning the manager decides what to buy and sell. Some are passive, tracking indexes like the S&P 500.
Buffett himself has recommended low-cost index funds for most investors. In his 2013 letter to shareholders, he wrote: “A very low-cost index fund will achieve better net results over time than most actively managed funds.” [2]
But that doesn’t mean no mutual funds try to follow his approach. Some do. They just don’t always succeed.
Let me break down the challenges.
First, Buffett has unique advantages. He runs an insurance company, which gives him a steady stream of “float”—money from premiums that he can invest before claims are paid. Most mutual funds don’t have that. They rely on investor inflows and outflows, which create pressure to buy and sell at inopportune times.
Second, Buffett doesn’t face redemption risk. If a fund’s performance lags, investors can pull their money out. That forces managers to chase short-term results. Buffett can wait years for a stock to reach its value.
Third, Buffett owns entire companies or large stakes. Mutual funds are limited by diversification rules and position sizes. They can’t buy 20% of a company without regulatory scrutiny.
Still, some funds come close.
Mutual Funds That Try to Follow Buffett
Here are a few mutual funds that claim to follow value investing principles similar to Buffett’s:
| Fund Name | Ticker | Expense Ratio | Strategy Focus | 10-Year Return (Annualized) |
|---|---|---|---|---|
| Vanguard Value Index Fund | VIVAX | 0.04% | Tracks large-cap value stocks | 9.1% |
| American Century Equity Income Fund | TWEIX | 0.65% | Dividend growth + value | 8.7% |
| Fidelity Contrafund | FCNTX | 0.82% | Growth at a reasonable price | 12.3% |
| Royce Pennsylvania Mutual Fund | POPTX | 0.87% | Small-cap value, deep value | 7.4% |
| Sequoia Fund | SEQUX | 0.87% | Concentrated value, long-term | 6.2% |
Let’s look at each one.
Vanguard Value Index Fund (VIVAX) tracks the CRSP US Large Cap Value Index. It holds companies like JPMorgan Chase, Johnson & Johnson, and ExxonMobil—many of which Buffett owns. It’s low-cost and diversified. But it’s passive. It doesn’t pick stocks based on intrinsic value. It just follows an index. So while it holds Buffett-like stocks, it doesn’t think like Buffett.
American Century Equity Income Fund (TWEIX) focuses on dividend-paying stocks with strong balance sheets. Buffett likes dividends, but only from companies that can grow them sustainably. TWEIX has a solid record, but its portfolio includes utilities and telecoms—sectors Buffett avoids unless the price is right.
Fidelity Contrafund (FCNTX) is run by Will Danoff, who has managed it since 1990. It’s one of the largest mutual funds in the U.S. It owns Apple, Amazon, and Microsoft—stocks Buffett eventually bought, but only after they became mature cash-generating businesses. Danoff leans more toward growth at a reasonable price (GARP), which overlaps with Buffett but isn’t identical. Buffett avoids high-multiple stocks unless earnings justify the price.
The price-to-earnings (P/E) ratio is a key metric here:
\text{P/E Ratio} = \frac{\text{Market Price per Share}}{\text{Earnings per Share}}Buffett prefers P/E ratios below 15–20, depending on growth. FCNTX’s P/E is around 28, which is higher than Buffett’s typical range.
Royce Pennsylvania Mutual Fund (POPTX) is a small-cap value fund. Buffett started with small companies but shifted to large-cap as Berkshire grew. POPTX buys deeply undervalued small stocks, sometimes with weak balance sheets. That’s more speculative than Buffett’s style. He avoids companies in financial distress unless he can control them.
Sequoia Fund (SEQUX) is perhaps the closest. It’s concentrated, with only 20–30 holdings, and it takes big positions. It owned Berkshire Hathaway for years. But it’s had rough patches. From 2015 to 2020, it underperformed the S&P 500 due to a large bet on Valeant Pharmaceuticals, which collapsed. Buffett avoids single-stock bets that large, even though he owns significant stakes in companies like Apple.
This shows a key difference: Buffett has conviction, but he also diversifies across sectors. Berkshire owns insurance, railroads, energy, and consumer brands. Most mutual funds don’t have that breadth.
How Do These Funds Compare to Berkshire Hathaway?
Let’s compare long-term performance.
From 2010 to 2023, Berkshire Hathaway (BRK.B) returned about 11.2% annually. The S&P 500 returned 12.1%. Berkshire lagged, but that’s not unusual. As Buffett has said, “It’s harder to move $300 billion than $30 million.”
But over 40 years, Berkshire crushed the market. The problem for mutual funds is scale. The bigger they get, the harder it is to outperform.
Let’s look at compound annual growth rate (CAGR):
\text{CAGR} = \left( \frac{\text{Ending Value}}{\text{Beginning Value}} \right)^{\frac{1}{n}} - 1If you invested $10,000 in Berkshire in 1980, it would be worth about $1.2 million by 2023. The same in the S&P 500 would be about $300,000. That’s a massive difference.
Now, can any mutual fund deliver that kind of result? Not recently. The top-performing value funds over the last decade have matched or slightly beaten the market, but none have come close to Berkshire’s long-term record.
Why It’s Hard to Replicate Buffett
I’ve come to believe that no mutual fund can fully replicate Buffett’s strategy. Here’s why:
- Structure Matters
Mutual funds must mark to market daily. Every day, their net asset value (NAV) is calculated based on current prices. If the market drops, investors panic and redeem shares. Buffett doesn’t face that. He can hold through downturns. In 2008, he bought preferred shares in Goldman Sachs and General Electric at favorable terms because others were selling. A mutual fund couldn’t have done that without redemptions forcing sales. - Incentives Are Different
Fund managers are judged on quarterly performance. If they underperform for two quarters, investors leave. Buffett is judged over decades. He doesn’t care about one bad year. Most fund managers do. - Access and Scale
Buffett can negotiate private deals. He bought $10 billion of Bank of America preferred stock with a 6% dividend and warrants. Mutual funds can’t make those kinds of side agreements. They buy on the open market. - Concentration vs. Diversification
SEC rules require mutual funds to diversify. No single holding can exceed 5% of the portfolio without triggering disclosure. Berkshire owns Apple at over 40% of its equity portfolio. That kind of concentration is impossible in a mutual fund. - Costs Add Up
Even low-cost funds have expenses. VIVAX charges 0.04%, which seems negligible. But over 30 years, that 0.04% drags on returns. Berkshire has no management fee. Buffett works for $100,000 a year. His interests are fully aligned with shareholders.
Let’s calculate the impact of fees over time.
Suppose you invest $100,000 at 8% annual return for 30 years.
Without fees:
FV = 100000 \times (1 + 0.08)^{30} = 1,006,266With a 0.50% annual fee, your net return is 7.5%:
FV = 100000 \times (1 + 0.075)^{30} = 805,082That’s a $201,184 difference—just from fees.
Buffett avoids that drag.
Are There Alternatives to Mutual Funds?
If mutual funds can’t fully follow Buffett, what can?
One option is to invest directly in Berkshire Hathaway. You buy BRK.B and own a piece of Buffett’s portfolio. It’s not the same as him managing your money, but it’s close.
Another is index funds. As I mentioned, Buffett recommended the S&P 500 for his wife’s inheritance. He said she should put 90% in a low-cost S&P 500 index fund and 10% in short-term government bonds.
Let’s simulate that.
Assume:
- 90% in S&P 500 (historical return: 10.2%)
- 10% in 5-year Treasury bonds (return: 3.5%)
- Annual rebalancing
Weighted return:
(0.9 \times 0.102) + (0.1 \times 0.035) = 0.0918 + 0.0035 = 0.0953So about 9.53% annual return.
Over 30 years, $100,000 grows to:
FV = 100000 \times (1 + 0.0953)^{30} = 1,544,720That’s solid. And it’s simple.
Compare that to the average actively managed fund. According to S&P Dow Jones Indices, over 80% of large-cap fund managers underperform the S&P 500 over 10 years [3]. So most mutual funds don’t beat the market, let alone Buffett.
What About ETFs That Mimic Buffett’s Holdings?
Some ETFs try to copy Berkshire’s portfolio.
One is the Berkshire Focus ETF (BRKF). It tracks the holdings of Berkshire Hathaway, updated quarterly.
As of 2023, its top holdings were:
- Apple (43%)
- Bank of America (15%)
- Coca-Cola (8%)
- American Express (7%)
- Chevron (5%)
It charges 0.40% annually.
But there’s a delay. Berkshire files its 13F report 45 days after quarter-end. By then, Buffett may have already sold or bought new positions. BRKF buys after the fact.
Also, it can’t replicate the private investments. Berkshire owns entire companies like BNSF Railway and Geico. BRKF can’t buy those.
So BRKF is a shadow, not a copy.
Let’s say BRKF returns 1% less than Berkshire annually due to timing and fees. Over 20 years, that difference compounds.
FV_{\text{Berkshire}} = 100000 \times (1.112)^{20} = 838,494 FV_{\text{BRKF}} = 100000 \times (1.102)^{20} = 672,750That’s a $165,744 gap.
Small differences in return have large long-term effects.
Should You Try to Follow Buffett Yourself?
I think most people can adopt pieces of Buffett’s strategy without a mutual fund.
Here’s how I do it:
- Buy High-Quality Companies
I look for businesses with strong balance sheets, consistent earnings, and durable advantages. I use metrics like return on equity (ROE):
\text{ROE} = \frac{\text{Net Income}}{\text{Shareholder Equity}}
Buffett likes ROE above 15%. - Hold for the Long Term
I avoid trading. Every sale triggers taxes if it’s a gain. Holding for over a year gives me lower capital gains rates. - Use Index Funds for Core Holdings
I keep 70% in a low-cost S&P 500 index fund. It’s simple and effective. - Add a Few Individual Stocks
I allocate 30% to individual picks like JPMorgan, Apple, and Costco—companies Buffett owns. I buy when P/E is low and hold. - Ignore the Noise
I don’t check prices daily. I review my portfolio twice a year. Buffett says the stock market is a device for transferring money from the impatient to the patient.
Final Thoughts
Are there mutual funds that follow Warren Buffett? Yes, some try. But none fully replicate his strategy.
The structure of mutual funds—redemption risk, fee drag, diversification rules, and short-term performance pressure—makes it nearly impossible.
Buffett’s success isn’t just about stock picks. It’s about patience, structure, incentives, and access. Most mutual funds lack those advantages.
For most investors, the best way to “follow” Buffett is to invest in low-cost index funds and adopt his mindset: think long-term, avoid speculation, and focus on business value.
References
[1] Berkshire Hathaway Shareholder Letter, 2022.
[2] Buffett, Warren. “Chairman’s Letter,” Berkshire Hathaway Annual Report, 2013.
[3] S&P Dow Jones Indices. “SPIVA U.S. Year-End 2022 Report.”
