Warren Buffett's top investing advice remains overcrowded, so buy small-cap value stocks for the long term, BofA strategist says

• Funds tracking the S&P 500 index are still overcrowded, according to Bank of America's Savita Subramanian.
• She told CNBC on Monday that investors should go long on small-cap value stocks.

The S&P 500 remains overcrowded, and investors should look beyond funds that track the broad market index, according to Bank of America's Savita Subramanian.

Legendary billionaire Warren Buffet has often preached that average retail investors should buy and hold an index fund tracking the S&P 500.

But that's no longer looking like the most attractive bet, even over the long term, the head of US equity and quantitative strategy at BofA Securities told CNBC on Monday.

"Don't own the index right now," she said. "I would be selective, and selectivity doesn't mean you have to pick stocks."

That could mean buying sector ETFs, the small-cap focused Russell 2000 index, or a "rest-of-world" fund, she added.

The problem with buying an S&P 500 index fund is that it "has this major risk of being the most crowded ticker in the world," Subramanian warned.

As passive investing has overtaken active investing, more money has shifted to funds that track the S&P 500, even pension funds, she explained.

But large-cap growth stocks, such as those that currently dominate the S&P 500, have already had their heyday, and now is the time to buy small-cap value stocks.

Subramanian's latest comments follow similar sentiments last September, when she opined that the S&P 500 was "worst thing to own" in the short term but still OK over the long term, while suggesting a short-term play in small-cap value stocks.

But on Monday, she indicated small-cap value is a long-term strategy too.

"I think what you want to do for the long haul is buy small-cap value [and] set it and forget it," Subramanian said. "We're at a good point right now where the small-cap value benchmark is at record cheapness versus large-caps."