One in 10 people in the UK have no savings at all, and quite a few of those will already have reached middle age. While older investors won’t have the same timescale to build wealth that youngsters have, it’s never too late. I reckon the best approach is to take a few lessons from legendary investor Warren Buffett.
Buffett is the chairman and CEO of Berkshire Hathaway, the investment company he’s led since 1965. In that time, he’s produced average annual returns of 20%, which is a monumental achievement.
It means every $100 invested in Berkshire Hathaway 40 years ago would be worth $63,000 today.
Berkshire Hathaway?
So maybe someone in middle age today would choose to invest in Berkshire Hathaway shares. If they have another decade or two before they hope to retire, they might get a decent return. History would be on their side, at least.
Whatever actual shares I chose, I’d certainly follow Buffett’s principles as best I could. After all, the man himself made the bulk of his wealth in the latter part of his life.
What’s my approach, then? Firstly, I’d be very careful not to rush into any investment without doing proper research and understanding what I was buying. That’s something where I think older heads have an advantage.
Early failures
In my younger days, I’d buy shares that appeared superficially good and looked like they were heading upwards. But I had as many failures as successes. I wasn’t taking the time to learn and understand.
Today, I let many opportunities pass me by. If it’s something I don’t fully understand, I’ll skip it. Buffett has always done that, and he hasn’t been at all bothered by the soaring high-tech successes that he missed.
The older I get, the more patient I’ve become. I don’t mind missing the latest fad winner. That’s because if I’d gone for it, I’d most likely have bought other rubbish too. And, overall, I’d probably have been worse off.
Strategy
What shares might I buy today, after years listening to Buffett? I look for companies with the ability to generate long-term cash flow. That’s what benefits shareholders most, I think.
I won’t buy stocks promising big things if I can’t see where the cash will come from in the decades ahead. And I’ll avoid firms with big debts, especially if they’re doing things like paying dividends at the same time.
I also evade ‘jam tomorrow’ shares, those with promising futures but no actual profits or cash today. Well, I might buy one occasionally with a very small investment. But it’s rare.
Diversification
And I always keep my investments diversified. Even the best company can hit unexpected bad times, and I don’t want too many eggs in one basket.
Today, I’m happier with the kinds of shares I’m picking than I’ve ever been, and it’s mostly thanks to what I’ve learned from Buffett. But maybe there’s one final move I should make — perhaps I should sell my shares and just buy Berkshire Hathaway.
