Warren Buffett is one of the most respected investors of our times. In fact, given that he bought his first shares when he was 12 years old in 1942, became a millionaire in 1962 and a billionaire over 30 years ago, he’s been respected for at least a generation or two. And his advice for investing over the years is as relevant in 2022 as when first given. So if I was looking to invest £2,000 in the coming weeks, here’s how I’d go about it.
Be patient
The first point I’d take from Warren Buffett is that the £2,000 is going to be invested for the long term. I’m not looking to buy the stock in January and become a millionaire by December. Buffett spoke of the value of being patient when he said that “someone’s sitting in the shade today because someone planted a tree a long time ago”.
What he means here is that to enjoy the fruits of my investing, I need to let my stocks grow over time. If I’m happy with the research I’ve conducted, then the share price should increase in value in years to come. I shouldn’t be overly concerned if in the short run I don’t see much progress in my portfolio.
If I struggle with this point, then I can always look to add some exposure to dividend stocks. This way, I’ll get the benefit of income paid out usually a couple of times a year. This will show results within my portfolio, even if my capital gains are still waiting to sprout.
Don’t overcomplicate things
One quote that I really like from Warren Buffett is when he said that “there seems to be some perverse human characteristic that likes to make easy things difficult”.
I can apply this to various points in life, but it’s especially relevant when it comes to investing. With my £2,000, I could create very complicated spreadsheets with many stock picks. In reality, I can create a very nicely diversified portfolio with a dozen stocks at most.
I don’t have to make those picks really complicated. I can pick a few of my favorite sectors, and select a couple of stocks from each area. If I can’t find one that I like, then I can sit on my cash for a while until an opportunity presents itself. I don’t need to force things.
Wise words from Warren Buffett
So what have I learnt? Well, I’d take a long-term approach to investing the £2,000 by picking stocks that should have good future value. I’d also try to keep my portfolio simple. This would include not picking too many stocks, and making sure I have a balanced mix of different sectors.
In this way, I can hopefully weather whatever choppy seas (Covid-19, or other issues I don’t yet know about) come my way in 2022 with regards to the stock market.
