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Invest like the best – how you could invest like Warren Buffett

Warren Buffett is probably the world’s most famous investor. We look at a few ways you could follow his principles to help grow your own wealth.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Warren Buffett is probably the world's most famous investor, and currently the fourth-richest man in the world, with an estimated fortune of around $68bn.

The 89 year old has invested through multiple market crashes, and has shared plenty of words of wisdom about how to invest when markets wobble. It’s no wonder that lots of people are looking to the ‘sage of Omaha’ for clues about investing in the current pandemic.

You might think that to use his investment strategies would require a serious amount of cash, but anyone can apply Warren Buffett's principles and hopefully grow their wealth over the long term.

Why not start now? Below we look at some ways you can start to invest like Warren Buffett today.

This article is not personal advice, if you’re unsure of the suitability of any investment you should seek advice.

Buffett on fear versus opportunity

Be fearful when others are greedy and be greedy when others are fearful.

Price is what you pay; value is what you get.

Two of Buffett’s most famous quotes, these tell us that we should keep a cool head when it comes to investing. Share prices and entire stock markets can over-react in the short term as investors’ emotions come to the fore, and share prices can move away from what the company’s really worth. The distinction between price and value is essential for investors.

In times like this, investors are fearful. Our own investor confidence index hit a high of 103 in January following Boris Johnson’s resounding election victory, but has since fallen to just 81.

Meanwhile as the coronavirus pandemic took hold across the world, stock markets tumbled. Buffett’s point is that when fear prevails, prices can fall too far, and this can present an opportunity for investors prepared to go against the herd.

History has shown that buying when valuations are cheap can push the odds in an investor’s favour and yield a greater chance of profit.

Of course we need to watch out for the opposite situation too. When investors get carried away, prices can rise to unsustainable levels – like we saw in the dotcom bubble of the late 90s. This is when Buffett tells us to be fearful.

Remember though all investments can fall as well as rise in value so you could get back less than you invest.

Buffett on the ups and downs

Bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price.

This tell us that provided we are looking to add to our investments, falling share prices shouldn’t necessarily be seen as bad news.

In fact, they could be cause for celebration as we could pick up a bargain which could be worth all the more when share prices eventually recover. Of course you’ll need to be prepared for prices to fall further as we don’t know when the bottom will be.

If you owned the businesses you liked prior to the virus arriving, it changed prices, but nobody’s forcing you to sell.

Our favourite holding period is forever.

Given the ups and downs of stock markets, we think it makes sense to hold shares for the long term.

At the recent annual meeting of Berkshire Hathaway, Buffett’s investment company, he discouraged people from selling investments purely because their prices change.

Instead he believes ‘the best thing’ for investors to bet on is the S&P 500 index, as it gives them a good spread of American businesses.

Buffett says if you wouldn't feel comfortable owning a company's shares for ten years, you shouldn't own them for ten minutes. This has led him towards companies he labels as ‘inevitables’ – those with extraordinary longevity and dominant market positions that could allow them to generate attractive returns for shareholders year after year.

In the next article of this series on experts we’ll be looking at Buffett’s teacher, Benjamin Graham, and how you too could follow in his footsteps to help achieve investing success.

Before that, find out how to build an investment portfolio


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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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