Image source: The Motley Fool
My investment strategy over the past few years has been heavily influenced by my favorite investor, Warren Buffett. As I continue to build wealth in 2024 and the years to come, I will not deviate from this.
There are many things retail investors can learn from the 'Oracle of Omaha'. When he was a child, he started investing with a few dollars. Today, he is one of the richest people on the planet, with a fortune of around $120 billion.
Now, I'm not saying that I will be able to reach the heights that Buffett has reached in his eight decades of investing. But there are certainly many things that investors can learn from him and use as motivation on their investing journey.
Buffett has averaged a 20% annual return in the years he has been investing. I'm trying to do the same with these tips.
Focus on the bigger picture
In today's world, there are many advertisements promoting the possibility of “get rich quick” through methods such as day trading. But Buffett ignores all that and prefers to invest for the long term.
To be fair, I can see why. The stock market has proven time and time again that the most efficient way to profit is to think years and decades with investments, not days or weeks.
The market is volatile. And as good as it would be if it weren't, the ups and downs are inevitable. Take the FTSE 100 as an example. In 2020, the index fell 15%. If you had invested only during that year, you most likely would not have been successful. However, since its inception in 1984, the index has returned an average of 7%. That's proof that playing the long game works.
Keep it simple
Another key piece of advice from Buffett is to understand the businesses you are buying. For both experienced investors and those just starting out, there are a plethora of companies and industries to explore in the market. This can make investing quite confusing and seem like a nuanced process. However, Buffett likes to keep it simple.
He once said that investors should be able to write in a notebook exactly why they plan to own that particular business. For me, being able to understand how the company generates revenue, as a starting point, is key to this. That's why in my portfolio I have companies like Barclays, Lloyd'sand Safe store.
Take advantage of opportunities
One last piece of advice is to be prepared to take advantage of the opportunities that the market offers. Yes, the last few years have been volatile. Many stocks have taken a hard hit. But that leads to falling prices and undervalued stocks. Buffett once said: “When it rains gold, take out the bucket, not the thimble.”. There is no better time than the present to start investing.
It's time to generate wealth
I see 2024 being another difficult year for the market. But I'm ignoring all the short-term volatility. By using these methods, I am confident that I will be able to continue building my wealth in the years and decades to come.
