US stocks and shares genius Warren Buffett is a clever man who knows how to make the complex seems simple. That’s one reason for his success as an investor, and his well-earned reputation as the ‘Sage of Omaha’.
I could highlight scores of top Buffett quotes but here I’m picking out what may be the simplest of all.
Buffett knows patience is a virtue
Strictly speaking, it’s not even his quote. It’s an old, old saying that he has applied to his investment strategy. “All good things come in time.”
That sums up how Buffett approaches life in six simple words. He has never been in a rush to build his wealth or his reputation, but knows that both will blossom over time if he keeps doing the right things.
In his case, this means buying undervalued companies that have temporarily fallen out of favour but remain strong, solid businesses. That way he gets them at a reduced price. The aim is to hold them until the rest of the stock market comes round to his way of thinking, by which time the price should be a lot higher.
While Warren Buffett waits, he re-invests all the dividends he receives back into the stock, to build his stake. A strategy like this plays out over years. Or rather, decades. Nobody will get rich overnight by following it. Nor will they lose their shirt.
Note that Buffett says ‘good things’ come in time. Another plank of his strategy is to buy only good quality companies. He doesn’t buy cheap rubbish. As he famously put it: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Good companies will prove their worth over time. As will bad companies, only in a very different way.
I’m following that strategy in my own small way right now, by scouring the FTSE 100 for solid blue-chip companies with low valuations. I’m prioritising firms with strong brands, loyal customers, low debt, healthy balance sheets and a competitive moat against rivals. A juicy yield is the icing on the cake (and I like icing).
I’m taking my time to get rich
When I have chosen my stocks, I will stick to the second part of Buffett’s mantra, the bit where good things come ‘in time’. I no longer buy shares in the hope of selling at a profit in a year or two, as I did when I first started out. Now I buy with the aim of holding for a minimum of five years, and ideally several decades.
There is a huge advantage to being a long-term investor. It means I don’t waste valuable time sweating over every jump market or dip. In fact, I can turn a stock market crash to my advantage, by using it to buy more of my favourite companies (the good ones) at a reduced price. Plus my reinvested dividends will also pick up more stock.
Over the years, my portfolio should roll up in value, slowly but steadily. Investing this way takes time, but the good things will surely come.
