Warren Buffett is one of the most respected investors of our times. His ability to start from virtually nothing to being the CEO of Berkshire Hathaway with over $960bn of assets is no small feat. So when I’m sat here trying to think of ways that I can eventually grow my £1k into £10k, I think turning to Buffett is a smart move.
Starting now, finishing later
One of the key points in copying Buffett is acknowledging that good things take time. He’s in his 90s, meaning that his fortune has been amassed over several decades. I’m hoping to enjoy the fruits of my labour in a shorter timeframe that that, but I’m trying to reach a much smaller asset figure.
It’s going to take several years for me to be able to increase my money by 10 times, and I need to appreciate this. It helps me to be patient and not make rash investment decisions. For example, I might be drawn to some scheme that seems I can make incredible returns overnight. In most cases, this isn’t legitimate and could be fraudulent.
I’ll be in a much better position by accepting that I should start investing now, given the realistic timeframe involved.
Investing in growth and value
At the moment, the largest shareholding that Berkshire Hathaway owns is Apple. This shows me that Buffett is keen to have exposure to one of the fastest growing sectors in the market — technology. From my end, I think it’s smart to copy this.
Over the past nine years, the Apple share price has rallied tenfold. It’s such long-term gains that can help me to achieve my goals. Clearly, looking in the rear view mirror is always easy when it comes to making comparisons. Will Apple shares rise by that much in the next nine years? Nobody knows. After all, over the past year it’s only up by 10%.
The main point here is that growth stocks are the area where such gains are possible.
Aside from growth stocks, Warren Buffett owns shares in Bank of America and American Express. These are both well established financial services companies. The value here is that although the share prices are unlikely to rocket higher, they should offer steady growth. This can help me to diversify my portfolio by including some value stocks to smooth out the volatile performance of growth shares.
Imitating Warren Buffett during tough times
Finally, if I want to try and max out my potential returns, I need to imitate Buffett during stock market uncertainty. He has long been an advocate of being greedy when others are fearful, and buying stocks at cheap levels.
This can boost my profit. For example, if I had invested in a FTSE 100 giant like Glencore during the pandemic crash in early 2020, I’d be up by 4.5 times. If I sold now for a profit and then took advantage of another slump, I could cumulatively achieve a 10-times return via several stocks over the years. This shows that investing during a crash for the long term can be a really smart play.
