Sometimes years or even decades pass by and good financial intentions have failed to materialise. We cannot all be as disciplined as famous investor Warren Buffett when it comes to building wealth.
However, it is possible to learn from proven stock market successes like Buffett when it comes to trying to get richer.
If I was near 40 and had no savings, here is how I would apply the Buffett method to my goal of growing wealth.
Be an investor not a speculator
Something simple but important when it comes to investing like Buffett is understanding just what investing actually means.
Not understanding a company but still buying its shares in the hope its price will go up fast is speculating not investing.
By contrast, Buffett’s approach is to see shares as buying a stake in a business.
He sticks to companies he understands and thinks have great business potential, then aims to buy their shares only when he believes they are attractively valued.
Having a long-term mindset
With his holdings in companies like Apple and Coca-Cola having stretched for decades already, Buffett is very much a long-term investor.
Investing for the long term should also offer me several benefits as I aim to build wealth. Chopping and changing portfolio holdings regularly usually means fees and costs can start to pile up.
But the main benefit I see in long-term investing of the sort Buffett does is that it gives time for what seems like a great company to prove itself. Hopefully that could be reflected in a rising share price, and perhaps dividends too.
Buffett’s investment in Apple is an example. With its strong brand and customer base, the business has set the stage for strong future performance. Owning his Apple shares for years has helped the ‘Sage of Omaha’ benefit greatly.
Better late than never
Buffett started investing as a schoolboy. By the time he was in his late thirties he was already a self-made millionaire.
But for most people, investing around age 40 from scratch would still provide decades in which they could buy shares in great companies and, hopefully, reap the benefits down the road.
To achieve that, I would diversify across a range of what I thought were quality businesses. I might be disappointed by some of my choices in the end, so spreading my risks seems wise. Buffett does exactly that, in fact, although he has also made some very costly investing mistakes alongside those more successful decisions.
Although it is important to consider individual financial circumstances when investing, I would try to put aside a decent amount of cash into a share-dealing account regularly. Making smart investment decisions could help me, but how much benefit I might gain from them would partly depend on how much I invested.
