How I’d follow Warren Buffett to try to make £1m from stocks and shares

Rupert Hargreaves is planning to follow this advice from Warren Buffett to improve his performance and build a substantial portfolio.

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.

Fans of Warren Buffett taking his photo

Image source: The Motley Fool

Warren Buffett has built a vast fortune investing in stocks and shares over the past seven decades.

Investors can learn a lot from this billionaire and his approach to the stock market. Indeed, I believe it is possible for me to build a £1m fortune by following Buffett’s principles over the next couple of decades. 

Investing in stocks and shares

It will not be easy for me to build a £1m fortune. It will take time and effort. I am well aware that successful investing is a marathon, not a sprint. It is highly unlikely I will build this nest egg over months. It could take decades for me to reach the target. 

Still, I believe that by following Buffett’s advice, I can increase my chance of success. Some of his most important advice revolves around picking stocks and managing a portfolio. 

When it comes to picking stocks, I intend to follow his advice closely. In particular, I will be sticking to his advice about finding high-quality companies and ignoring any businesses I do not understand. 

One of the easiest ways to lose money as an investor is to buy into corporations that are difficult to understand. Therefore, if I struggle to understand how a business makes money, I will avoid the opportunity. I will also be avoiding a company if it is losing a lot of money. In my opinion, this is the opposite of a high-quality business. 

Further, there are some sections of the market that I will also be avoiding, no matter how attractive the opportunities are. These are the early-stage pharmaceutical and mining companies. Buffett has never invested in these sectors, and neither will I. 

Warren Buffett’s advice for investing

The billionaire investor has plenty of tips when it comes to portfolio management. 

He recommends only investing in a stock that can be held it for at least five years. This is the approach I will be using to manage my portfolio. He also recommends that investors focus on their favourite companies and not spend too much time trying to diversify into different stocks for the sake of it. Once again, I intend to follow this advice. 

To hit my target, I believe I will have to put away at least £500 a month and achieve a compound annual return on my money at 10% for at least three decades.

Of course, there is no guarantee I will be able to hit this target. Picking stocks and shares is challenging, and just because a company has performed well in the past does not mean it will continue to do so. Neither does following Buffett’s advice guarantee I will become wealthy. 

However, by following the ‘Oracle of Omaha’s’ principles, I believe I can increase my odds of building a £1m nest egg with stocks and shares. 

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 considered so you should consider taking independent financial advice.

Rupert Hargreaves 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.

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