Forget the US election. I’d listen to Warren Buffett and buy cheap shares to become an ISA millionaire

Don’t waste your time trying to predict who will win next month. This Fool thinks you should carry on investing like Warren Buffett.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As if 2020 hasn’t been challenging enough, the forthcoming US election could bring forth another wave of volatility in the markets. Even so, I think all UK investors should take the battle between Donald Trump and Joe Biden in their stride. Learning to think like master money-maker Warren Buffett will definitely help.

Buffett’s first rule

Buffett’s first rule of investing — “never lose money” — is good all-weather advice. As such, I think it’s likely the ‘Sage of Omaha’ will continue to recommend that all investors should do their homework, regardless of who might win the US election. The more you know about a company before buying its shares, the better your chances of making money.

Gambling with your cash based on the outcome of events, however tempting, isn’t advised. This is partly why the wealthiest investor on the planet doesn’t have a TV in his office. Not being hooked up to the 24/7 newsflow allows him to concentrate on the things that truly matter. The businesses he buys stakes in.

Buffett’s first rule has an additional meaning for those investing in the UK. By not keeping your shares within an ISA, you will lose money by virtue of paying capital gains tax on any profits you make. To make matters worse, you’ll also be taxed on any dividend income you receive from stocks you own. This double-whammy could really hurt your chances of ever making it to millionaire-status.

Keep buying wonderful companies

Buffett buys shares in quality businesses when they go on sale. The coronavirus crash earlier in the year was an excellent example of when, to parphrase the great man, “we should all have been greedy rather than fearful.” The forthcoming US election could be another. 

Great companies are likely to remain great. This is regardless of who emerges triumphant and whatever decisions they make during their presidential term. Sure, increased regulation of big tech giants, or the resumption of the trade war between the US and China, could make investors temporarily skittish. But the major themes of investing in the years ahead are unlikely to be affected.

Companies specialising in clean energy sources, for example, are very likely to remain popular, given the ongoing concerns around climate change. Demand for healthcare will also continue to rise as populations age. The need for cybersecurity will increase as the amount of ‘smart’ stuff in our homes grows.

None of the above will be impacted by who gets the keys for the White House. Invest accordingly. 

Hold forever

Market commentators will continue to speculate over what a second term for Trump, or a first for Biden, will mean for global markets. The truth is, it really shouldn’t matter to ISA investors buying shares for the long term.

Buffett has frequently said that his favourite holding period is “forever.” Earlier this year, he also remarked that “nothing can stop America when you get right down to it.”

So far, he’s been absolutely right. Pull up a chart of the S&P 500 index over the last 50 years, or so. You’ll see a line rising from the bottom left to the top right. In other words, US stocks have gained massively in value, regardless of all the Republican and Democratic leaders over that time.

Don’t fear any US-election volatility. Do the same as Buffett. Embrace it.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Google office headquarters
Investing Articles

1 reason I like buying S&P 500 shares – and 1 reason I don’t

Will this investor try to improve his potential returns by focusing more on S&P 500 shares instead of British ones?…

Read more »

Young woman holding up three fingers
Investing Articles

3 SIPP mistakes to avoid

Our writer explains a trio of potentially costly errors he tries to avoid making when investing his SIPP, on an…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Here’s how (and why) I’d start buying shares with £25 a week

Our writer uses his investment experience and current approach to explain how he would start buying shares on a limited…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s my 5-step approach to earning passive income of £500 a month

Christopher Ruane explains the handful of steps he uses to target hundreds of pounds in passive income each month.

Read more »

Investing Articles

2 UK shares I’ve been buying this week

From a value perspective, UK shares look attractive. But two in particular have been attracting Stephen Wright’s attention over the…

Read more »

Investing Articles

A lifelong second income for just £10 a week? Here’s how!

With a simple, structured approach to buying blue-chip dividend shares at attractive prices, our writer's building a second income for…

Read more »

Investing Articles

Here’s how I’d use a £20k Stocks and Shares ISA to help build generational wealth

Discover how our writer would aim to turn a £20k Stocks and Shares ISA into a sizeable nest egg by…

Read more »