Warren Buffett says: Invest in index funds

Closeup of stock certificate

Invest in mutual funds designed to track a large segment of the stock market such as the S&P 500.

"Index funds beat the majority of amateur-managed money or professionally managed money," Warren Buffett told shareholders at this year's annual meeting of Berkshire Hathaway, his investment company.

That's not a new position for the world's richest and most renowned investor. And it makes index funds a great choice for retirement plans such as 401(k)s and IRAs.

"There's nothing wrong at all with not knowing how to evaluate individual stocks," Buffett has said in the past. "If you're reasonably sure that American business will do well over the long term, then invest for the long term in a broad index fund...

"Buy in installments, over time. Look for low fees. You may get a higher gross return with an actively managed mutual fund than with an index fund, but your net return after fees are taken out may be lower."

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