Here’s how I’d invest using the Warren Buffett method to make a million

Using Warren Buffett’s investing methods could be a sound means of generating high returns, in my view. It may increase an investor’s chances of making a million.

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.

Warren Buffett’s investing methods have enabled him to become one of the most successful investors of all time.

Fortunately for other investors, his strategy is well-known and relatively simple. As such, it can be successfully implemented to potentially deliver higher returns in the long run.

With many sound businesses trading at low prices following the stock market crash, there may be opportunities to make impressive returns in a likely stock market recovery. An investor may even be able to make a million.

Warren Buffett’s focus on economic moats

Warren Buffett doesn’t only consider the price of a stock before investing money in it. In fact, his major consideration has historically been the competitive position of a business, and whether it has a clear and sustainable advantage over its peers.

A company that has a wide economic moat — as Buffett describes as having a competitive advantage — may be able to deliver more robust profit growth in a range of market conditions than its sector peers.

Economic moats may become even more important over the coming years. The full impact of the coronavirus pandemic remains a known unknown. As such, only those businesses that have a clear competitive advantage over their peers may be able to deliver rising profitability. Such companies may, for example, have unique products, brand loyalty or cost advantages. This means they’re highly attractive to investors such as Warren Buffett at the present time.

Confidence in a long-term stock market recovery

Warren Buffett has historically been optimistic about the prospects for a stock market recovery after even the very worst periods for the economy. For example, he was investing money in stocks following the global financial crisis when other investors were selling. Indeed, he’s always had confidence in the capacity of share prices to recover from their lows. Especially as economic performances improve, profits rise and investor sentiment strengthens.

Therefore, investors who adopt a similar approach may benefit from a likely stock market rally. So don’t worrying about how the FTSE 100 and FTSE 250 may perform over the next few months. A more profitable move may be to consider how their price levels are likely to change over the coming years. This may enable an investor to more easily capitalise on low stock market valuations. Just as Warren Buffett has done over many years.

Making a million

Clearly, following Warren Buffett and making a portfolio valued in the tens of billions isn’t possible for the vast majority of investors. However, obtaining a portfolio valued at over a million could be a more realistic aim than many investors realise.

Even if an investor obtains the same 8% annual total return as the FTSE 250 has delivered in the past 20 years, a £750 monthly investment would become worth over £1m within 30 years. But it may be possible to achieve the goal of a £1m portfolio much sooner. Investors just have to focus on economic moats and have a long-term timeframe, 

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.

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

1 no-brainer pick I’d love to buy for my Stocks & Shares ISA!

A Stocks & Shares ISA is a great investment vehicle for our writer. Here she explains why, and one stock…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Just released: our 3 best dividend-focused stocks to buy before May [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Will the Rolls-Royce share price keep rising in 2024?

With the Rolls-Royce share price going on a surge, this Fool wants to look forward to where it could potentially…

Read more »

Investing Articles

£10k in an ISA? Here’s how I’d target a regular £30k+ second income stream

Reliable dividends can help provide a lot more financial freedom. Here's how I'd aim for a substantial second income inside…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Lloyds share price hanging on to 50p ahead of Wednesday’s Q1 earnings report. Where to now?

Down in April and with low earnings expected this week, Mark David Hartley investigates where the Lloyds share price might…

Read more »

artificial intelligence investing algorithms
Investing Articles

Everyone’s talking about AI! Here’s 1 FTSE stock to consider buying for exposure

A hot topic right now is artificial intelligence (AI). This Fool explains how this FTSE stock could offer investors an…

Read more »

British Pennies on a Pound Note
Investing Articles

1 penny stock I’d buy today while it is 99p

Ben McPoland highlights Windward (AIM:WNWD), a fast-growing penny stock that could benefit from the artificial intelligence revolution.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

This forgotten FTSE 100 gem could be the best bargain on the stock market

The FTSE 100 is full to the brim of high-quality businesses. But this Fool has his eye on this 'forgotten'…

Read more »