“Over the years, I’ve often been asked for investment advice, and in the process of answering I’ve learned a good deal about human behaviour,” writes Warren Buffett in his latest chairman’s letter to shareholders of Berkshire Hathaway.

“My regular recommendation has been a low-cost S&P 500 index fund. To their credit, my friends who possess only modest means have usually followed my suggestion.“

Rich investors tend to ignore Mr Buffett’s advice.

“I believe, however, that none of the mega-rich individuals, ins...