I’m building my wealth by copying Warren Buffett

Warren Buffett has built a fortune that many investors dream of. This Fool plans to build his wealth by copying the legendary investor.

| More on:
Fans of Warren Buffett taking his photo

Image source: The Motley Fool

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When it comes to learning more about the stock market, there aren’t many better teachers out there than Warren Buffett.

Starting from near enough scratch, over the years he’s proven his worth as one of the best stock pickers of all time. Today, he sits on a net worth of over $137bn. His company, Berkshire Hathaway, has enough cash on hand to buy every NFL team and still have some spare change.

Buffett deals in figures larger than I ever will. But that’s not to say I can’t pinch some wisdom from the ‘Oracle of Omaha’. I plan to implement the methods Buffett has used for his investment strategy into mine. That way, I’m confident I can build my wealth.

The bigger picture

The most important tip to take away from Buffett’s strategy is one that strongly aligns with what we believe here at The Motley Fool. That’s to invest for the long term.

The stock market is surrounded by a whirlwind of noise. But Buffett ignores that. He’s been investing for over eight decades. He once famously said his “favourite holding period is forever”. He’s owned shares in companies such as Coca-Cola and American Express since 2001.

As simple as it sounds, you only have to look at Buffett’s track record to see the effectiveness of it. The market has proven time over that investing for the long run is the best way to reap its rewards.

Keep it simple

What I also admire about Warren Buffett is the fact he only invests in things he knows. Essentially, he only buys companies when he understands how they make money.

For example, he turned down the opportunity to invest in Amazon and Google’s parent company Alphabet because he didn’t understand their business models.

He missed out on some handsome gains. But there’s a lesson in that. There are a wide variety of companies and sectors out there to research and invest in. However, focusing on what you have a base understanding of can make the process much easier.

Applying it to my portfolio

But how can I apply this to my portfolio?

Buffett’s Berkshire portfolio consists of 47 companies. Yet there’s a company out there that he doesn’t own but I think he’d like. I’m talking about Safestore (LSE: SAFE).

Let’s break it down. Firstly, I can easily understand how the business makes money. It’s far from glamorous, but Safestore rents out storage units. It’s the largest of its kind in the UK. The firm is also making solid progress with its overseas expansion.

Secondly, while past performance is no indication of any potential future gains, an investment in Safestore 15 years ago would have returned 1,278.2%.

Volatility is inevitable. And the business faces risks going forward. High interest rates may see customers let go of storage space given higher rents. Increased borrowing costs could impact the firm’s ability to purchase new properties.

However, like Buffett, I’m ignoring that in favour of the long-term potential of Safestore. He likes to buy companies at cheap prices. Safestore trades on just 8.3 times earnings, so it ticks that box. I’m also a fan of its 4% dividend yield, too.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in Safestore Plc. The Motley Fool UK has recommended Alphabet, Amazon, and Safestore Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Caucasian woman holding up four fingers
Investing Articles

7%+ dividend yields! 4 FTSE 100 shares for investors to consider buying in April

These FTSE shares offer dividend yields comfortably above the index average of 3.7%. Here's why they could be good passive…

Read more »

Dividend Shares

£10k in an ISA? Here’s how to generate a ton of passive income

Passive income can provide a lot more financial freedom and security. Here’s an easy way to generate some within an…

Read more »

Investing Articles

The Aviva dividend yield’s already over 7%. Could it go higher?

Christopher Ruane explains why he thinks the Aviva dividend could be on course to grow this year and beyond. Might…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

2 shares I’d buy to try and double my money in 10 years

Stephen Wright thinks there are still opportunities to to buy UK shares that can double in value over the next…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

NIO stock has crashed! Here’s why I still wouldn’t touch it with a bargepole

I've been watching NIO stock falling heavily, and wondering when might be a good time to get in cheaply. Here's…

Read more »

Investing Articles

Why have Rolls-Royce shares fallen this week?

Rolls-Royce shares remain the best performing on the FTSE 100 over the past year, but there's been some pullback. Dr…

Read more »

Investing Articles

With a 4.3% yield, I consider this FTSE company an exceptional investment

Oliver Rodzianko say this FTSE company is focused on quality and long-term survival. As such, he thinks he'll hold it…

Read more »

Investing Articles

How I’d invest £10,000 in a Stocks & Shares ISA and aim for a £45,500 second income

Millions of us aren’t earning the second income we deserve. Here, Dr James Fox explains how he’d get his savings…

Read more »