Warren Buffett is one of the best known investors ever. We can’t really hope to be as good as he is. But we can learn from him and get better at it.
The tough times in 2023 are making us think about how we might get on when we’re older. And many haven’t saved a penny yet.
But I say it’s almost never too late to get started. We just need at least a decade in which we can stash some cash away regularly.
I see some great shares to buy right now. But there are traps too. And early falls can put you off the stock market for life.
Today, I want to talk about what I’ve learned from Warren Buffett. And how I think he can help us avoid those traps.
Shares or charts?
Do we buy shares, then watch the chart each day to see how we’re doing? Charts tell us nothing about dividends from, say, Barclays over the next 20 years.
And we learn nothing about debt progress at Rolls-Royce Holdings from a wiggly line on a screen.
So that was my first lesson. I’m not buying a share price on a chart, I’m taking part ownership of a business. And I need to treat it like I’m an owner.
That brings me to another thing I’ve learned of the Buffett method.
Markets closed
What if the market closed for 10 years? No buys, no sells, and no charts to check. Business would carry on making profits and sending us dividends. Just no trades, and no share prices.
Buffett says that if we won’t buy a stock in those conditions, don’t buy it at all.
I don’t find this one too hard. When I started, there was no internet and I used a telephone broker. I had no live share prices, and my source of data was a shelf bent under the weight of company reports.
But it all still worked just fine.
Quality counts
I’ll stick to just two more, for now. Buffett buys top quality stocks, not cheap stocks. When the two come together, that’s a bonus. But quality is key.
That can mean strong cash flow, key advantages, essential goods and services, smart management, and plenty of things shared by our top blue-chip companies.
Buffett is happy to pay a fair price. But he wont buy junk, no matter how cheap it is. I haven’t always managed the second part of that.
Time, not timing
My final thing for now is to forget timing. It’s time in the market that counts, not timing the market. So don’t try to hit the tops and bottoms. Just buy great stocks at fair prices… and hold them for 10 years or more.
Since Buffett took over Berkshire Hathaway in 1965, he’s made an average 20% a year return. That’s huge.
I can’t do that. But if I can get, say, 7-10% a year, that could set me up well for when I retire. And I think the Buffett method can help me do it.
