25% of Warren Buffett’s Secret Portfolio Is Invested in These 3 ETFs. Here’s Why They’re Great Picks for 2024.

If you go to a magic show, there’s always more than meets the eye going on. It’s a similar story with the “market magician” — Warren Buffett. The legendary investor holds positions in more stocks than meets the eye.

All of the stocks you see listed in Berkshire Hathaway‘s 13-F filings aren’t the only Buffett stocks. He also has a “secret portfolio” of sorts. How? Berkshire’s fully owned subsidiary, New England Asset Management (NEAM), has its own portfolio.

NEAM doesn’t just have positions in stocks, though. Roughly 25% of Buffett’s secret portfolio is invested in these three exchange-traded funds (ETFs). Here’s why they’re great picks for 2024.

1. SPDR S&P 500 ETF Trust

More than 14% of NEAM’s portfolio is invested in one ETF — the SPDR S&P 500 ETF Trust (SPY -0.17%). This ETF is by far the largest holding in Buffett’s secret portfolio.

The SPDR S&P 500 ETF Trust, as its name hints, tracks the S&P 500. This ETF owns positions in all 500 companies in the index, which translates to over 500 stocks because some of the members trade under multiple tickers. It’s also the largest S&P 500 ETF based on assets under management.

Why is this ETF a great pick for 2024? From a short-term perspective, the S&P 500 tends to perform relatively well in U.S. presidential election years. With inflation moderating, the U.S. economy rocking along, and the Federal Reserve predicting interest rate cuts on the way, the SPDR S&P 500 ETF Trust could be poised for another year of delivering solid gains.

From a longer-term perspective, the ETF offers diversification across a portfolio that includes many of the most successful businesses in the world. It also has a built-in process of weeding out losers and replacing them with winners thanks to the S&P 500’s regular rebalancing. Buying and holding S&P 500 ETFs such as the SPDR S&P 500 ETF Trust has proven to be a smart investing strategy through the years.

2. iShares Core S&P 500 ETF

You might be surprised to learn that the second-largest position in Buffett’s secret portfolio is also an S&P 500 ETF. Nearly 7% of NEAM’s portfolio is invested in the iShares Core S&P 500 ETF (IVV -0.17%).

There’s not much to differentiate the iShares Core S&P 500 ETF from the SPDR S&P 500 ETF Trust. They both track the S&P 500 index and therefore own the same stocks. The most significant difference between the two ETFs is their expense ratios. The iShares Core S&P 500 ETF is slightly more attractive on this front with an expense ratio of 0.03% compared to an expense ratio of 0.0945% for the SPDR S&P 500 ETF Trust.

All of the short-term and long-term reasons to buy and hold the SPDR S&P 500 ETF Trust also apply to the iShares Core S&P 500 ETF. It’s a solid pick for the new year.

3. iShares Core MSCI EAFE ETF

No, NEAM’s third-largest holding isn’t another S&P 500 ETF. However, it is another index ETF managed by iShares. More than 4% of Buffett’s secret portfolio is invested in the iShares Core MSCI EAFE ETF (IEFA -0.98%).

This ETF attempts to track the performance of the MSCI EAFE index that includes large-cap, mid-cap, and small-cap stocks in Europe, Australia, Asia, and the Far East. It currently owns 2,868 stocks. The iShares Core MSCI EAFE ETF’s top holdings include Novo Nordisk, Nestle, ASML Holdings, LVMH, and Shell.

Investing in the iShares Core MSCI EAFE ETF could be a smart move for the new year. Charles Schwab analysts recently wrote, “Stocks with low price-to-cash flow ratios — more heavily represented in the MSCI EAFE Index — may continue to outperform in 2024.” The iShares Core MSCI EAFE ETF provides a great way to invest in this international index, especially with its relatively low expense ratio of 0.07%.