Warren Buffett and his team are used to investing millions or even billions of dollars at a time. Sadly, not everyone has that luxury. But his methods are still applicable even when investing as little as £300 a month.
Like many investors, the Oracle of Omaha started his investing journey with very little capital. And while replicating his $100bn fortune over the next 80 years isn’t likely, adopting his approach and mentality can still pave the way to a potentially far more comfortable and luxurious lifestyle in the long run.
Just keep reading
One of the most powerful weapons an investor can have is to simply be informed. Most of Warren Buffett’s workday consists of him sitting in his office reading books, financial reports, newspapers, and more.
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Research lies at the heart of his investing method and can’t be rushed. Analysing annual accounts, regulatory filings, and other research reports can provide enormous insight into a company’s operations, capital allocation, managerial skill, efficiency, and addressable market, to name a few.
All of these are critical factors to consider before making an investment decision. And not necessarily for the stock Buffett may have in mind.
Weakness in a business may unveil a far more promising competitor. Similarly, recurring trends can reveal the formation of new market opportunities. And those with only a few firms pursuing them offer investors the chance to buy potentially undetected lucrative stocks early on.
Buffett on consistency
When paired with compounding, the power of investing consistently can work wonders. It’s often tempting to stop investing during times of volatility. After all, when the stock market is seemingly in freefall, throwing money into equities may seem like an insane idea. And waiting out the storm sounds far more sensible. Yet in practice, this is seldom the case.
Waiting for the financial markets to stop throwing tantrums is akin to market timing. And history has proven countless times that this is a loser’s game that’s almost entirely based on luck. Waiting for the storm to end often results in investors missing out on incredible gains. Don’t forget stock market recoveries are some of the most lucrative periods for investors to capitalise on.
That’s why, despite all the recent chaos with inflation, interest rates, and now the banking sector, Warren Buffett has been on a shopping spree. In fact, it’s the most active he’s been in over a decade as a net buyer of stocks.
For investors with £300 a month, drip-feeding money into an investment portfolio is a prime way to follow in Buffett’s footsteps. Obviously, there’s the risk that shares will drop in the short term, even for some of the best businesses in the world.
However, providing an investor can identify terrific high-quality stocks capable of long-term growth and value creation, further downward volatility creates even better prices. And in the following months, investors can top up their positions, bringing their average cost down while boosting their potential long-term gains.
