Becoming a multibillionaire like Warren Buffett is unlikely for most. However, by using his methods, I believe it’s possible to start with just £500 and create substantial wealth over a lifetime.
First I need a suitable share-dealing account designed to maximise my returns. I believe the wisest route is a Stocks and Shares ISA. With this UK government-backed programme, investors pay no tax on price gains and dividends. We can invest up to £20,000 per year in our portfolios via an ISA.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Picking investments to beat the market
At The Motley Fool, we believe we can beat the general market by picking individual shares. My own very ambitious goal is to achieve roughly 15% annual compound interest over the next 10 years and beyond. I buy a lot of US shares as well as UK and European ones, and for comparison, the most common US general market benchmark is the S&P 500. This typically generates around 10% annually.
I’m primarily a technology researcher. Therefore, I have a detailed outlook on what I consider the best investments in this field. While tech is high-growth over the long term if I pick successful companies, diversification is critical when constructing a portfolio to mitigate risk.
At the moment, some of my largest investments include Alphabet, Games Workshop, and LVMH. Another I’m eyeing is Intuitive Surgical (NASDAQ:ISRG).
Where robotics meets healthcare
Intuitive Surgical is a very special company, in my opinion. It’s exactly the kind of investment opportunity I typically look out for. I think Buffett might agree that management has carved out a powerful “moat”, which means it’s difficult for competitors to challenge it.
After all, its Da Vinci systems, where surgeons can operate remotely through four robotic arms, are unmatchable, in my opinion. In addition, once these are installed by health centres or hospitals, the high costs of implementation mean competitors are unlikely to be able to take market share. The company has a significant lead here in total installations.
Its technology could potentially implement advanced AI and begin to integrate some elements of autonomous surgery. As it stands, the company hasn’t made any public statements indicating that, however. This opens up room for new tech companies to potentially compete.
Yet for now, I think Intuitive Surgical’s moat is very strong, and I haven’t seen any disruptive new companies trying to challenge it.
I’m aiming for £1m or more
Most of us in the real world have to start small; I know I did. But I’ve developed a long-term plan. A big part of this is investing about 15% of my earnings every month.
As an example, starting with just £500 and adding roughly £200 per month and investing in the stock market could lead to a total portfolio value of over £1.4m in 30 years. It may not, of course and I might lose money as well as make it.
Buffett doesn’t just invest in high-growth companies that have enduring competitive advantages. He also has a value investing strategy. Adding that mindset to my investment plan is crucial, as it means I won’t buy shares when they’re too pricey.
In the case of Intuitive Surgical, the valuation looks a little high to me right now, but not too high to stop me from investing in it soon.
