The Vice President’s investments reflect common sense — and confidence in America’s future.
Much of the United States is starting to learn more about Kamala Harris, the Democratic nominee for President — and current Vice President. They’re focusing not only on her accomplishments and policy positions (such as on Social Security), but also on other things. For example, you might have learned that her name means “lotus” and that as a child with Indian and Jamaican roots, she attended both a Baptist church and a Hindu temple. She also loves to cook and wears Chuck Taylor sneakers.
We investors are likely to be interested in how she invests her money. It turns out she may have been paying attention to advice from Warren Buffett.
Vice President Kamala Harris participates in a tour of the Carpenters International Training Center Saturday, July 3, 2021, in Las Vegas. Image source: Official White House photo by Cameron Smith.
How Kamala Harris is invested
A recent Wall Street Journal article offered a glimpse into the portfolio of Kamala Harris and her husband, Doug Emhoff. In a nutshell:
- Much of their money is invested in simple index funds.
- They keep a significant chunk of assets in cash, too.
- They own a property and have a mortgage with a 2.65% interest rate.
- Much of their assets are in retirement accounts.
Specifically, Vice President Harris’ investments include an international fund, a large-cap fund, a mid-cap fund, several target-date funds (with dates of 2030 and 2045), a “stable value” fund, a large-cap growth fund, and an S&P 500 index fund. Her husband is likewise invested in a wide range of index funds, mostly Vanguard ones, many of which are exchange-traded funds (ETFs).
Warren Buffett on index funds
One might wonder whether Vice President Harris is heeding advice from legendary investor Warren Buffett, because he has long extolled index funds, recommending them for his wife and for average Americans. (He even made a 10-year, million-dollar bet favoring them over hedge funds — and won the bet handily.)
Do Kamala Harris’ investments make sense?
What should we make of Vice President Harris’ investments? Well, they seem very sensible, for a variety of reasons:
- Leaning heavily on index funds is a smart move for anyone who isn’t a stellar stock picker (and few of us are).
- Index funds have significantly outperformed their actively managed counterparts over long periods. For example, according to the folks at S&P Dow Jones Indices, over the past 15 years, the S&P 500 index outperformed a whopping 88% of managed large-cap mutual funds, and it outperformed 87% over the past decade.
- Index funds can really be all you need to amass a fat nest egg for retirement.
- Diversification is generally good, and her assets are invested not only in big American companies, but also in smaller companies and international companies.
- By focusing assets on broad index funds instead of cherry-picking individual companies, she can avoid conflicts of interest and the appearance of conflicts of interest. That seems like a smart move for a politician who doesn’t want to end up accused of investing in particular companies and then favoring legislation that benefits those companies.
- Making good use of retirement accounts is also a savvy move, as they can help one build a nest egg in tax-smart ways.
Finally, there’s this: As Warren Buffett has noted, investing in index funds, particularly S&P 500 index funds, is like betting on America. If America and its economy prosper over many years, so will its companies — and funds that are invested in a broad swath of such companies will likely do well. Indeed, the S&P 500 has averaged annual gains of around 10% over many decades — including dividends and not including the effect of inflation.
What does this mean for you?
What might you take away from this examination of Kamala Harris’ investments? Well, consider favoring index funds yourself. If you do, and you assume, somewhat conservatively, that your investments will grow at an average annual rate of 8%, this is how much you might amass over long periods:
|
Growing at 8% for |
$7,500 invested annually |
$15,000 invested annually |
|---|---|---|
|
5 years |
$47,519 |
$95,039 |
|
10 years |
$117,341 |
$234,682 |
|
15 years |
$219,932 |
$439,864 |
|
20 years |
$370,672 |
$741,344 |
|
25 years |
$592,158 |
$1,184,316 |
|
30 years |
$917,594 |
$1,835,188 |
|
35 years |
$1,395,766 |
$2,791,532 |
|
40 years |
$2,098,358 |
$4,196,716 |
Source: Calculations by author.
See? You don’t need to be a super stock picker. As some have quipped, instead of looking for the needle in the haystack, you can just invest in the whole haystack. (Note that no one knows just how the stock market will perform over any period. Over your particular investing timeframe, it might average 8% or 12% or 6%.)
It’s not easy to outperform good, low-fee index funds. So do consider including them in your long-term investment portfolio.
