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 market returns have made him a legend. One of his key thoughts on growing wealth is one that I want to pinch to help accelerate my wealth going forward.
Listening to the great man
The idea centres around a quote from Buffett when he said that “if you don’t feel comfortable owning something for 10 years, then don’t own it for 10 minutes.”
He was primarily referring to owning a stock. It shows his timeframe when it comes to investing, namely to think about the long term. When it comes to picking a stock to buy, Buffett insists that I have to be happy to own it for a decade or more. If there’s some company-specific reason why 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 his 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 shares back in 1988!
Looking at his results
Owning stocks for a long time is great, but it only works if it really can have a positive impact on growing my wealth. To prove that in theory I could double my wealth over the next decade, I can look back at the impact it had on Buffett.
At the moment, his estimated net worth is $121.5bn. Roughly a decade ago, this figure sat at $58.5bn. I can do a similar exercise from earlier decades in his investing career and can find a similar result. So it’s clear that the method of holding sound stocks for a long time has paid off for him.
Of course, this doesn’t in any way guarantee that I can do the same for my wealth over the next decade. But it does make me confident that this method can work, and potentially is a better option than alternative investment strategies.
Putting it into practice
In terms of practical examples, I’m thinking of areas that should be doing well over the next decade. I’ve split them into two camps. On one hand there are the mature companies that have proven track records. This would include the likes of Shell, HSBC and BAE Systems (a FTSE 100 founding member!).
The other allocation would go to firms that I think could be the next big thing. This would be from sectors like artificial intelligence and renewable energy. Examples I like are Nvidia and SSE.
I don’t know if Buffett would buy these exact stocks. But I think he might broadly agree with the principle behind my thoughts of investing for the long term.
