A Lesson From Buffett’s $1 Million Bet
In 2008, Warren Buffett made a quiet $1 million bet.
He wagered that a simple, low-cost S&P 500 index fund would outperform a group of carefully selected hedge funds over the next decade. No market timing. No billion-dollar strategy teams. Just one rule: stay invested and let compounding do the work. Ten years later, the index fund won, by a mile. Protégé Partners participated in this challenge, and after a decade, their chosen hedge funds returned approximately 36%, while a simple S&P index fund returned around 126%.
It’s a lesson in how experienced investors think. They don’t chase trends. They don’t react to noise. And they don’t let money sit idle. Instead, they focus on compounding growth over time and look for ways to keep every part of their portfolio working.
Here’s how that mindset works in practice and where securities lending fits in.
Habits that set successful long-term investors apart
Time, not timing
There’s an old saying among professional investors:
“Time in the market beats timing the market.”
Some of the best-performing investors aren’t looking for next week’s rally. They’re thinking in decades. This long-term view brings stability, helps ride out volatility, and allows long-term strategies to unfold.
- Example: Fidelity’s study on accounts with the best returns — often belonging to investors who forgot they had accounts.
- Also, Peter Lynch, legendary investor, once said “Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves.”
Staying invested through market volatility
The theory of loss aversion says humans fear losses more than they value gains. It’s why so many investors sell during downturns, often missing the recovery. Yet just a handful of strong days can drive returns over a decade. Experienced investors know this. They stay invested, even when it’s uncomfortable, because history shows that patience pays.
- Example: In March 2020, during COVID’s crash, the S&P 500 fell ~34% in a month — but regained all losses in 5 months. Investors who panicked missed one of the fastest rebounds in history.
- Stat: Missing just the 20 best days in the S&P 500 between 2002–2022 cut returns by 50%.
Making the most of compounding returns
In 1952, mathematician Albert Bartlett warned that “the greatest shortcoming of the human race is our inability to understand the exponential function.” He was talking about compounding: growth that builds on itself. It’s how reinvested dividends, interest, and returns can snowball over time.
For example, CHF 10'000 compounding at 8% annually becomes nearly CHF 47'000 in 20 years and over CHF 100'000 in 30 years, all without changing your strategy. Institutions like pension funds build portfolios around this principle. They don’t chase quick wins. They let small gains accumulate into something greater.
Building multiple income streams
Rather than relying solely on stock price growth, successful long-term investors include income from dividends, bond payments and increasingly, earnings from the assets they already hold. This diversified income makes portfolios more resilient through changing market conditions.
Putting idle assets to work
Many portfolios hold assets – stocks, bonds, ETFs – that just sit. They're not being traded or sold. They’re waiting.
Experienced investors ask: what else can this do?
One increasingly common answer is securities lending.
Earn more from your existing investments with securities lending
“Securities lending lets investors temporarily loan out the shares they own to institutions like banks. You remain the owner. You keep your market exposure. But while those shares are on loan, you earn a fee.”
It’s like renting out a spare room. You keep the asset. Someone else pays you to use it.
Here’s how it works:
- You enrol in a lending program, such as Swissquote's Passive Income Plan.
- Your shares are borrowed, if there’s demand.
- You earn income for as long as your shares remain on loan.
- You’re protected by collateral. Borrowers provide an “insurance” worth more than the loaned shares, monitored daily to ensure coverage.
- You're always in control. You can see what’s on loan, track earnings and recall shares at any time.
Why securities lending supports long-term investing
It rewards patience
The longer you hold, the more opportunities your portfolio has to generate lending income.
It doesn’t disrupt your strategy
If your shares are in demand, they may be lent. If not, they stay put. No effort required. It’s truly passive.
It adds another layer of passive income
Lending adds another income stream alongside dividends and interest. Over time, that extra line item adds up.
In Q2 2025, Swissquote clients earned $514'000 from securities lending. One stock, CoreWeave, generated over $18'000. All by staying invested.
Securities lending isn’t new. It’s used by millions of individual investors around the world, as well as pension funds, ETFs and sovereign wealth funds. What’s changed is how accessible it’s become: automated, transparent and easy to manage.
Final thoughts: Letting your portfolio work harder
Building wealth over time isn’t about doing more. It’s about thinking differently.
Real success often boils down to consistency, patience and recognizing when parts of your portfolio can do more without extra effort.
Buffett didn’t win his famous wager by taking big risks. He won by being patient and deliberate. Securities lending fits that mindset. It doesn’t demand action, it simply allows your assets to earn more in the background.
Sometimes the smartest move is to do nothing and still get rewarded for it.
Securities lending is a regulated activity. Please note, it is your responsibility to ensure that your marketing communications comply with all relevant legal and regulatory requirements in your country of business.
The content in this article is provided for educational purposes only. It does not constitute investment advice, financial recommendations, or promotional material. Investing in digital assets carries a high degree of risk.