Warren Buffett has long recommended investing in index funds.

For everyday investors, owning low-cost, passive funds provides access to a broad swath of the market, which helps mitigate the risk that a slide in one or even a few stocks torpedoes your portfolio’s performance. Plus, you’ll likely come out ahead of a lot of professional investors over the long run, the Berkshire Hathaway chairman says.

“In my view, for most people, the best thing to do is to own the S&P 500 index fund,” he said at the 2021 annual meeting of Berkshire Hathaway shareholders.

Indeed, over the 15 years that ended June 30, just 12% of actively managed funds that track large-company U.S. stocks outperformed the S&P 500, according to S&P Global.

Jim Cramer agrees with Buffett’s philosophy — to an extent. The host of CNBC’s Mad Money says broad market index funds should make up about half of your portfolio, with most of the rest disbursed across a handful of individual stocks.

The central idea around Cramer’s new book, “How to Make Money in Any Market,” is simple: In addition to owning a diversified portfolio, anyone can also be savvy enough to research and own winning stocks.

“Let’s say you did my method, my program, where you were half index funds, and let’s say you picked a good stock. How about Berkshire Hathaway?” Cramer tells CNBC Make It. “Had you bought Berkshire Hathaway, you would have made a fortune.”

Since the start of 1982, stocks in the S&P 500 have returned a cumulative 11,916%. Berkshire shares have grown by 133,775%.

Buffett’s advice applies to what he calls “know-nothing investors.” That’s because Buffett, a great stock picker, knows how much work goes into building a market-beating portfolio.

“You do not want to ever get the impression that you can pick stocks,” he told CNBC’s On the Money in 2017.

Rather, he said, “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.”

But Cramer argues that anyone can pick great stocks and shouldn’t settle for index returns.

“I hate average, even as I accept it as a necessary evil in a diversified portfolio,” he writes in his book. “Are you proud of being average in any other walk of life? Would you have bought a book called Making Money the Average Way by Mediocre Joe? The S&P is average.”

To beat the average, Cramer says, you’ll have to pick a handful of stocks that will deliver prodigious long-term growth — a task that’s easier said than done. But to find an example of investors who beat the odds, Buffett needs to look no further than the arena full Berkshire Hathaway shareholders who attend his annual meetings, Cramer says.

“Since 1982, I’ve been recommending that stock. How do you think I’ve done for people versus the index fund?” Cramer says. “I crushed it.”

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