Warren Buffett is one of the most successful investors ever. And like many, the ‘Oracle of Omaha’ started investing with a small amount.
With his fortune being over $100bn, it’s unlikely I’ll be able to emulate his success. However, I think this shows that even without savings, building wealth is possible.
If I had to start today, here are the methods I’d copy from Buffett to do it.
Invest regularly
With no savings, I don’t have a lump sum of cash to kickstart my investing journey. Therefore, putting money aside and investing it on a consistent basis is key to helping my savings pot grow.
By doing this, I can reap the benefits of compounding. Buffett has alluded to the power of this method, stating how he’s generated his wealth from “a combination of living in America, some lucky genes, and compound interest”, Ignoring the first two (as neither applies to me), placing an emphasis on compounding is a strategy I can adopt to aid me in the long run.
Long-term approach
With that, Buffett doesn’t invest for a quick payday.
Building wealth isn’t going to happen overnight, it’s a process. And as has been proven time and time again, adopting a long-term approach is the best way to reap the rewards.
Volatility in the stock market is inevitable. And we’ve most certainly seen this in the past few years. However, these short-term peaks and troughs are ironed out in the long run.
Take the S&P 500 as an example. 2022 saw the index fall by 18%. Yet in the last decade, it’s risen around 16% a year on average.
With no savings, I may often feel inclined to sell when I see the value of my investments dwindling. However, by viewing them over a timeframe of five to 10 years minimum, I can ignore short-term volatility in favour of long-term growth.
On top of this, by investing on a regular basis and with a long-term approach, I’d also benefit from ‘pound cost averaging’, which essentially balances out the price that I buy at.
Be alert
I’d also have to be alert. Buffett has stated on multiple occasions to “be greedy when others are fearful”. And this means that when opportunities arise in the stock market to buy quality companies cheaply, I must be ready to act.
Buffett did this in the global financial crash of 2008 when he bought a host of stocks at slashed prices.
What to buy?
So, with all that, what sort of companies should I be buying?
Well, Buffett’s portfolio includes the likes of Apple, Coca-Cola, and Bank of America. And it’s quality companies in which I see long-term growth potential (such as Buffett did with these) that I should be targeting.
Of course, replicating the methods of Buffett is easier said than done. However, by copying him and despite a lack of savings, I’m fairly confident I could build wealth in the long run.
