Yahoo Finance 8 Ways To Invest Like Warren Buffett and Be Financially Successful in 2024
Berkshire Hathaway’s chairman, famed investor Warren Buffett, is known for expressing the view that holding steady and being patient are key to successful investing.
See: The 6 Investments Everyone Should Make During an Economic Downturn
Find: 3 Things You Must Do When Your Savings Reach $50,000
The Oracle of Omaha is the nation’s most popular billionaire, according to a recent CNBC poll, which is not surprising given his conglomerate’s success. Indeed, Berkshire’s compound annual gain was 19.8% from 1965 through 2022, compared with 9.9% for the S&P 500, CNBC reported. In 2023, Berkshire’s class A shares were up 16%.
So, it’s no wonder that many investors turn to his every move for guidance. And in 2024, if you want to invest like Buffett and be financially successful, experts outlined a few things you might want to do.
Sponsored: Get Paid To Scroll. Start Now
Big Picture Investing: Think About the Forest, Not Just the Trees
Here’s some Buffett brilliance for you: Think big picture, said Kraig Kleeman, CEO and founder of The New Workforce.
“You know, like focusing on the forest instead of getting hung up on each tree. Refrain from sweating the small stuff too much if you’re putting money into stocks,” said Kleeman. “What matters is how solid the whole operation is. Are the companies you’re investing in healthy overall? Do they have a game plan that makes sense? That’s where your attention should be.”
Stick to the broad strokes and let the day-to-day stuff slide — it’s all about playing the long game, he added.
I’m a Self-Made Millionaire: Here Are 5 Stocks I Won’t Sell
Don’t Invest in Fads
Buffett famously stays away from investing in fads and doesn’t suffer from FOMO, said Robert R. Johnson — PhD, CFA, CAIA and professor of finance at the Heider College of Business, Creighton University.
For instance, Johnson noted that in the late 1990s, Buffett was ruthlessly pilloried by financial journalists for staying away from internet stocks. That internet bubble burst months later, while Berkshire stock soared.
“Today, he is being criticized in some circles for deriding cryptocurrencies. Buffett has been very forceful warning of people committing funds to cryptocurrencies,” he added. “Buffett is an investor and not a speculator. Now, that doesn’t mean that if one’s timing is right, that one can’t make money speculating.”
Don’t Chase Winners
Too many investors suffer from recency bias, tending to overvalue more recent experiences and undervalue experiences from the more distant past, said Johnson.
“In essence, many investors assume what is currently happening (good or bad) is going to continue into the indefinite future. There is something about seeing others get rich quickly that brings out the greed in all of us,” he said, adding that it can be detrimental to our financial health.
“We would be wise to heed Warren Buffett’s advice to ‘be greedy when others are fearful and fearful when others are greedy,'” he said.
The Zen of Patient Investing: Buffett’s Long Game Strategy
Buffett is “the Yoda of playing the long game in investing,” said Kleeman.
“It’s all about that Zen vibe of patience, letting your investments simmer on the back burner and grow over time,” he added. While quick trades might give you a rush, they can also lead to some face-palm moves and chip away at your cash with all those extra fees, he said.
Indeed, Buffett famously said: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” This was a quote he wrote in his 1996 letter to shareholders, one which captures his long-term perspective.
“So, take a breath, play the long game, and watch your money do its thing. Compounding isn’t just a fancy word; it’s your best bud for building wealth,” added Kleeman.
Reinvestment for Growth: Buffett’s Key to Long-term Success
As Kleeman explained, Buffett is big on companies that only spend some of their cash when they get it.
“That’s reinvestment, and it’s like supercharging their future — and yours, too, if you’ve got a slice of the pie,” he noted, adding that when you’re on the hunt for a solid investment, look for the players who are playing the long game, using their profits to fuel more wins down the road.
“That kind of move can turn a good investment into a great one,” he suggested.
Investing With Purpose
“Buffett’s got a clear message: Don’t just throw your money into the market because it’s burning a hole in your pocket. It’s like grocery shopping when you’re hungry and buying everything. Bad idea!” said Kleeman.
Instead, invest with a plan, not just on a whim. Take your time, do your homework, and ensure you get value.
“It’s all about being smart with your money, not just fast,” said Kleeman.
Don’t Make Mistakes (That Is, Stay Within Your Circle of Competence)
Much of successful investment practice is simply not making mistakes. Just like turnovers in football are highly correlated to losing games, making big mistakes in investments sets investors back, said Johnson.
“Mistakes occur when investors commit funds to new endeavors that they really don’t understand. Warren Buffett has created an empire by investing in boring staid enterprises like See’s Candies, Dairy Queen and Nebraska Furniture Mart,” he said, adding that these may not be “sexy companies,” but they perform well.
Johnson added that Buffett has likened investing to a baseball batter who doesn’t have to swing at pitches they don’t like.
“He has even said it’s akin to a baseball hitter in which there are no called strikes. In other words, even if a pitch is a strike, you don’t have to swing,” Johnson indicated.
Free Cash Flow Reigns Supreme
As Peter C. Earle — senior economist, American Institute for Economic Research — said, cash flow is “a financial compass.” Investors can gauge a company’s operational prowess by assessing surplus cash generated after essential capital expenditures.
“Berkshire is currently sitting on about $150 billion in cash,” said Earle, noting that it’s a big enough market participant to push things around, if it wanted to.
“Instead, they are content to build up a war chest and wait for prices, valuations, and deal terms to come to them. It may take a few months or even a few years, but patience is an underappreciated virtue,” he added.
Kleeman echoed the above sentiment, saying that Buffett’s got a point about having cash on hand — but it’s equally important for investors to know how to balance safety and opportunity.
“Sure, it feels good to have a pile of cash to fall back on but don’t let it turn into a dragon’s hoard that you never touch. If you’re saving up for a rainy day, excellent, but remember, if you’re sitting on a mountain of cash when inflation’s doing its thing, you could be missing out on some sweet investment moves that’ll help your money grow,” said Kleeman. He added that balance is essential — have enough cash to sleep well at night but not so much that it’s just sitting there, gathering dust.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: 8 Ways To Invest Like Warren Buffett and Be Financially Successful in 2024
