Warren Buffett once shared his simple strategy for avoiding big mistakes in the stock market — and you ‘don’t need to listen’ to gurus, read the news or monitor the market. Are you invested?

But the stock market is unpredictable, and not everyone shares Buffett’s track record. We’ve all heard cautionary tales of investors losing fortunes chasing stock tips.

Buffett believes many investors fall into a fundamental trap. In an interview with Yahoo Finance, Buffett was asked what he sees as the biggest mistake investors make.

His response was immediate: “They just don't realize that all you have to do is just buy a cross section of America, and they never listen to people like me or read the papers or do anything subsequently. They think that because you can trade, you should trade.”

Put simply, investors trade too often. Buffett attributes this issue to the stock market’s low transaction costs compared to other asset classes.

“You buy a farm, you buy an apartment house, you can't resell it tomorrow [because of] the cost of moving around. Now you get something handed to you — liquidity, which in an instant, you can sell, and the cost of doing it are pennies compared to other kinds of investment activity. So because they can so easily move around, they do move around and moving around is not smart in investing,” he explained.

In other words, just because you can trade frequently doesn’t mean you should.

Warren Buffett proclaims: The best thing to do

Buffett’s message is clear: Long-term success in investing doesn’t require constant buying and selling. He advocates owning a “cross section of America.”

This philosophy stems from his unwavering confidence in the U.S. economy.

“American business — and consequently a basket of stocks — is virtually certain to be worth far more in the years ahead,” Buffett wrote in his 2016 letter to shareholders.

Berkshire’s own investment strategy reflects this belief. Its US$295-billion equity portfolio is heavily weighted towards American companies across diverse industries, reinforcing Buffett’s faith in the nation’s long-term economic strength.

For those unsure about which American businesses to invest in, Buffett offers a straightforward solution: “In my view, for most people, the best thing to do is own the S&P 500 index fund,” he famously stated.

This simple approach gives investors exposure to 500 of America’s largest companies across various industries, providing diversified exposure without the need for constant monitoring or active trading.

Buffett’s commitment to this strategy is evident in his estate planning: he has directed that 90% of his wife’s inheritance be invested in “a very low-cost S&P 500 index fund” after his passing.