Warren Buffett Says Buy This Index Fund. It Could Turn $400 Per Month Into $851,800 With Help From Apple, Nvidia, and Tesla.

• Warren Buffett has consistently recommended an S&P 500 index fund as the best form of stock market exposure for most investors.

• Even professional investment managers struggle to consistently outperform the S&P 500 over long periods, with just 15% making the cut in the last three years.

• The S&P 500 returned 1,860% over the last three decades, or 10.4% annually, a pace that would turn $400 per month into $851,800.

• 10 stocks we like better than Vanguard S&P 500 ETF ›

Warren Buffett has earned a reputation as one of Wall Street's greatest investors. The many acquisitions and stock purchases he has engineered since assuming control of Berkshire Hathaway in 1965 have created immense wealth for shareholders. Berkshire stock has returned 20% annually over the last six decades, while the S&P 500 (SNPINDEX: ^GSPC) has gained 10.4% annually.

Nevertheless, I suspect many investors ignore one of his more prudent recommendations. Buffett has often advised investors to periodically buy and patiently hold an S&P 500 index fund. "I recommend the S&P 500 index fund, and have for a long, long time, to people," he said in 2021.

Here's how that advice could turn a $400 monthly investment into $851,800 over 30 years.

The S&P 500 measures the performance of 500 large and profitable U.S. companies that cover about 80% of domestic equities and 50% of global equities by market value. The Vanguard S&P 500 ETF (NYSEMKT: VOO) tracks the S&P 500, allowing investors to spread capital across many of the most influential businesses in the world.

The 10 largest positions in the Vanguard ETF are listed by weight below:

1. Apple: 6.7%

2. Microsoft: 6.2%

3. Nvidia: 5.6%

4. Amazon: 3.6%

5. Alphabet: 3.5%

6. Meta Platforms: 2.5%

7. Berkshire Hathaway: 2.1%

8. Broadcom: 1.9%

9. Tesla: 1.6%

10. Eli Lilly: 1.5%

Warren Buffett, in his 1993 letter to shareholders, wrote, "By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals." Indeed, only 15% of large-cap funds outperformed the S&P 500 over the last three years, meaning most professional money managers struggle to consistently beat the index.

Buffett added context in his 2016 shareholder letter. "American business -- and consequently a basket of stocks -- is virtually certain to be worth far more in the years ahead." An S&P 500 index fund satisfies that criterion. It is a readymade portfolio comprising hundreds of companies that form the foundation of the United States economy, which itself is the world's most prosperous and innovative large economy, according to JPMorgan Chase CEO Jamie Dimon.