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Forget the Bitcoin price! I’d use Warren Buffett’s methods to make a million with UK shares

Peter Stephens
·3-min read
close-up photo of investor Warren Buffett
close-up photo of investor Warren Buffett

Warren Buffett’s investing methods could offer a simple and effective means of making a million with UK shares. His focus on buying high-quality companies for less than they are worth, and holding them for the long run, has been a profitable means of capitalising on stock market cycles.

Of course, the rising Bitcoin price could tempt some investors away from FTSE 100 and FTSE 250 shares. However, its lack of fundamentals and the opportunities available from UK shares mean that purchasing a range of them could be a more profitable move.

Using Warren Buffett’s investment methods to buy UK shares

Using Buffett’s methods to buy shares is likely to mean a focus on the quality of target companies, as well as their prices. In terms of quality, he has historically sought to invest money in businesses that have wide economic moats. This means that they have a competitive advantage over their peers that can result in higher profitability in a range of operating conditions.

As well as investing money in high-quality companies, Buffett aims to buy them at a price that is below their intrinsic value. In other words, he seeks to pay a discount to what he thinks they are worth. This provides him with a margin of safety in case their prospects are less favourable than expected. It also offers greater scope for capital gains over the long run.

Investing money in FTSE 100 and FTSE 250 shares today

The 2020 stock market crash means that many UK shares could fit Warren Buffett’s criteria of trading at low prices. Furthermore, there is currently weak investor sentiment towards a number of sectors that face challenging near-term outlooks. This may mean there are high-quality companies trading at prices that undervalue their long-term prospects.

Investing in them could allow an investor to generate higher returns than the wider stock market over the long run. Even if they achieved a similar rate of return as the FTSE 100 has managed in the past (8% per annum), making a million could be an achievable aim. For example, investing £750 per month at an 8% return for 30 years would produce a portfolio valued at over £1m.

Avoiding a rising Bitcoin price

Warren Buffett has held negative views towards Bitcoin for some time. Its lack of fundamentals mean that it is not possible to determine how much it is worth. And since its value relies upon investor sentiment, it can be a risky means of seeking to generate capital gains.

As such, using Buffett’s strategy to buy UK shares across the FTSE 100 and FTSE 250 could be a better idea. It may lead to impressive returns over the long run as the stock market recovers. It may even lead to a portfolio valued in excess of £1m.

The post Forget the Bitcoin price! I’d use Warren Buffett’s methods to make a million with UK shares appeared first on The Motley Fool UK.

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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.

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