5 investing secrets from Warren Buffett

Alice Guy takes a look at five investing secrets from super-rich investor Warren Buffett. What can we learn from him about building long-term wealth?

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Image of person checking their shares portfolio on mobile phone and computer

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Last week was World Investor Week. So, with investing fresh in the mind, what better time to get some investing tips from super investor Warren Buffett? He’s one of the world’s richest men, with an estimated wealth of $100 billion. And he’s made most of his wealth from long-term investing.

Let’s dive in and take a look at five of Warren Buffett’s investing secrets. What can he teach us about long-term investing?

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1. Develop frugal habits

Despite being one of the world’s richest men, Warren Buffett doesn’t believe in flashing the cash.

He usually buys breakfast in McDonald’s, and he enjoys shopping around for good car deals. He even lives in the same house he bought in 1958.

All that frugal living means that he’s got a lot more cash to invest. And the more he invests, the more his wealth grows.

2. Avoid debt

Warren Buffett doesn’t take out car loans or take on credit card debt. OK, it’s fair to say he doesn’t need to now that he’s rich.

But it’s still something all investors can learn from. If you build up an emergency fund and save up for bigger purchases, you can pay for unexpected costs with your savings instead of taking on expensive debt.

If you’ve already got debts, then paying them off as soon as possible will help you to save on interest costs. Citizens Advice and Stepchange offer advice if you’re struggling to pay off your debts.

And any money saved can be ploughed into more savings and investments.

3. Invest in yourself

Warren Buffett believes that your biggest asset is yourself. And investing in yourself can help you to build long-term wealth.

Are you hoping to start a new career? Take that training course. Do you want to start your own side hustle business? Start researching and work out the skills you need to improve.

If you get that promotion or earn that extra cash, then you will have more to invest and you will be able to grow your wealth in the long run.

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4. Use index funds

Once you’ve got some spare cash to invest, where should you start? For most investors, Warren Buffett recommends investing in a low-cost index fund. 

UK index funds or index tracker funds invest in all the shares in the FTSE 100 or FTSE 250. That means that you will invest in nearly all the big companies in the UK. If one business fails, then it won’t impact you too much as it will only be a small part of your investment portfolio.

In the UK, you can invest in an index fund using a pension fund or a stocks and shares ISA.

5. Hold shares for the long term

Warren Buffett believes in holding shares for the long term.

That means you shouldn’t panic and sell your investments if the stock market crashes. You don’t need to if you are investing for long-term wealth as you have time for the stock market to bounce back.

Historically, investing in shares is one of the best ways to beat inflation. For example, if you had invested £1,000 in the FTSE when it began in 1984, then it would now be worth £7,095 today. Now that’s not a bad return on your investment!

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