Warren Buffett is considered by many to be the best investor of all time. He’s also one of the most successful self-made billionaires of all time.
Indeed, as a young investor he started out as a paperboy, ploughing all of his savings into businesses. He bought his first stock at 11 and over the next decade owned a string of different companies, including a petrol station (which ultimately failed).
From that early age, Buffett understood what made a good business. He wanted to buy high-quality companies that generated a lot of profit and had a good, reliable customer base. He also tried to avoid taking on a lot of debt, or investing in organisations with a lot of borrowing.
This approach has helped him get to where he is today. And it’s something any investor can follow.
Following Buffett to get rich
If you’ve £10,000, or any other amount, to invest today, following Buffett’s investing road map may make a lot of sense.
Over the years, the billionaire investor has owned thousands of different companies and stocks. All of these businesses have had several things in common. They have all had strong balance sheets and leaders in their sector or industry.
He will also only ever buy a business if he thinks the price is right. He wants to buy good quality companies at attractive prices. Unfortunately, these opportunities don’t come around too often. But Buffett isn’t in a rush. He’s willing to wait years for the right opportunity to arrive.
It may be sensible to follow the same approach. Buffett will only buy a stock when he knows the business well, and he’s sure the stock is undervalued. This process takes time, but he wants to be sure he’s not buying anything he doesn’t understand.
Investors may benefit from doing the same. Many have lost vast fortunes running into investment opportunities they don’t understand. They might look like a good deal at first, but if something is too good to be true, it usually is. Buffett spends just as much time trying to avoid these big losers as he does looking for big winners.
So, by following Buffett and focusing on buying good companies at great prices, investors may be able to improve their chances of building a large financial nest egg.
Buffett also believes it’s vital to focus on the long term when investing. He’ll only buy companies that he thinks will be around in 10 or 20 years from now. This means he doesn’t have to find new investments every year and can sit back and let these stocks do all the hard work.
By following this example, any investor could improve their chances of success in the stock market.
The post £10k to invest? I’d follow Warren Buffett to get rich appeared first on The Motley Fool UK.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020