Money

Warren Buffett and Tony Robbins agree on the best way to invest your money

Warren Buffett and Tony Robbins agree that the most important investment you can make is in yourself.

And when it comes to investing your money and saving up for retirement, Buffett and Robbins are also in sync: They both recommend investing in index funds. Especially if you're young and/or new to the market.

"Consistently buy an S&P 500 low-cost index fund," Buffett recently told CNBC's On The Money. "I think it's the thing that makes the most sense practically all of the time."

Warren Buffett
David A. Grogan | CNBC
Warren Buffett

Index funds hold every stock in an index such as the S&P 500, including big-name companies such as Apple, Microsoft and Google, and offer low turnover rates, so their fees and tax bills tend to be low as well.

Because this type of fund ebbs and flows with the market, it stays relatively constant and avoids the risk that comes with picking individual stocks.

"The trick is not to pick the right company; the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low cost way," he told On The Money.

Buffett even says that investing in index funds would be the advice he'd leave for his wife if anything were to happen to him. And the Oracle of Omaha has put his money where his mouth is, too: He made a bet that, over a ten-year period, low-cost index funds would outperform hedge funds, and so far he seems to be justified.

Robbins also stands by index funds. In a recent interview with Business Insider, he says that it's crucial to diversify your investments, and that index funds are a good place to start. "You can't put all of [your money] in one place," Robbins tells Business Insider.

Robbins goes into more detail on index funds in his book "Unshakeable," in which he explains that funds eliminate the human error — and therefore the risk — that is inherent in picking stocks individually.

"Index funds take a 'passive' approach that eliminates almost all trading activity," he writes.

Because humans aren't actively managing index funds, they also aren't actively making mistakes. "When you own an index fund, you're also protected against all the downright dumb, mildly misguided or merely unlucky decisions that active fund managers are liable to make," Robbins writes.

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