Image source: The Motley Fool
Despite the sad recent death of his right-hand man Charlie Munger, investor Warren Buffett is still very active in the stock market. His decades of experience and profitable returns in the market have made him a legend. One of his key thoughts on increasing wealth is one that I want to leverage to help accelerate my wealth in the future.
Listening to the great man
The idea centers on a quote from Buffett when he said that “If you're not comfortable owning something for 10 years, then don't own it for 10 minutes.”
It mainly referred to owning stocks. It shows your calendar when it comes to investing, that is, thinking about the long term. When it comes to choosing a stock to buy, Buffett insists that I have to be happy owning it for a decade or more. If there's some company-specific reason I wouldn't want to do this, it doesn't make sense for me to buy it.
Buffett has used this method successfully when picking stocks over the years. When I look at your current portfolio, it includes stocks like Coca Cola, American Express and kraft heinz. He has owned all of these for a long period of time. When I say a long period, consider the fact that he first bought Coca-Cola stock in 1988!
Looking at your results
Owning stocks for a long time is great, but it only works if it can truly have a positive impact on the growth of my wealth. To prove that I could theoretically double my wealth over the next decade, I can remember the impact it had on Buffett.
At the moment, his estimated net worth is $121.5 billion. About a decade ago, this figure was $58.5 billion. I can do a similar exercise from previous decades of your investing career and find a similar result. So it's clear that the method of holding strong stocks for a long time has paid off for him.
Of course, this in no way guarantees that I will be able to do the same with my wealth over the next decade. But it does give me confidence that this method can work and is potentially a better option than alternative investment strategies.
Putting it into practice
In terms of practical examples, I'm thinking about areas that should perform well over the next decade. I have divided them into two sides. On the one hand there are mature companies that have a proven track record. This would include people like Shell, HSBC and BAE Systems (to FTSE 100 founder member!).
The other allocation would go to companies that I think could be the next big thing. This would come from sectors such as artificial intelligence and renewable energy. The examples I like are NVIDIA and ESS.
I don't know if Buffett would buy exactly these stocks. But I think that, generally speaking, he might agree with the principle behind my ideas of investing for the long term.
