With no savings, I’d listen to Warren Buffett to aim for long-term wealth

Warren Buffett looks for “1-foot bars” to step over, not “7-foot bars” to jump. Stephen Wright looks at what this means in terms of shares to buy.

| More on:
Long-term vs short-term investing concept on a staircase

Image source: Getty Images

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 investing to build wealth over time, Warren Buffett knows what he’s doing. The Berkshire Hathaway CEO has a net worth in excess of $130bn (£105bn). 

In my view, a lot of investors could do well by listening to what the ‘Oracle of Omaha’ prescribes. And having no savings shouldn’t be an impediment to getting started.

Don’t overcomplicate things

One of most important pieces of advice is to avoid making things more complicated when they need to be. As Buffett puts it “I don’t look to jump over 7-foot bars. I look around for 1-foot bars I can step over”.

There are literally thousands of stocks available to buy from companies in all different sectors and geographies. Being able to compare all of them intelligently is nearly impossible.

Fortunately, investing well doesn’t necessarily involve comparing Helium One with Visa. In fact, according to Buffett, the key is carefully avoiding the comparisons that are just too difficult.

Instead, the Berkshire boss prefers to restrict his focus to companies that he can assess intelligently. And if nothing stands out as an opportunity, then he’s prepared to wait until it does.

Don’t lose money

Different investors have different abilities. Someone with an engineering background might be well-placed to assess Rolls-Royce, whereas a PhD biologist might have a better view on GSK.

The reason it’s important to stick to what can be intelligently evaluated is because this minimises the risk of loss. And the first rule – according to Buffett – is to avoid losing money.

In the short term, stock market volatility can result in an investment being worth less than what it was bought for and there’s not much anyone can do about that. But that’s not what Buffett means.

The kind of losses he aims to avoid are permanent losses due to problems with the underlying business. And the risk of this happening is higher with a business that is harder to understand.

A UK stock to consider buying

With all this in mind, one stock that stands out to me is JD Wetherspoon (LSE:JDW). The FTSE 250 pub chain is about as straightforward as they come in terms of an investment proposition. 

Being based in the UK means there’s a significant danger of rising taxes – especially on alcohol. And while this is a risk that can’t be entirely ignored, the company does have a lot going for it.

Wetherspoon’s low prices to customers give it a clear point of differentiation. And its ability to charge lower prices is the result of its policy of owning its pubs outright, rather than leasing them.

This kind of business is – in my view – relatively uncomplicated. It has a model that has been proving resilient even in an economic downturn and I think is likely to do so in future.

Getting started

Buying shares in Wetherspoon – or any other UK stock – doesn’t require huge savings. In fact, even if I had no savings, I’d look to start investing as soon as possible.

Building an emergency fund to avoid having to sell shares at the wrong time is crucial. But doing this alongside investing carefully in stocks I can understand looks to me like the way to go.

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.

Stephen Wright has positions in J D Wetherspoon Plc. The Motley Fool UK has recommended GSK, Rolls-Royce Plc, and Visa. 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

Satellite on planet background
Investing Articles

At just under £14, can BAE Systems’ share price still be a prime FTSE 100 bargain? 

Despite its bullish price run, BAE Systems’ share price still looks undervalued to me and appears set for strong growth.

Read more »

Photo of a man going through financial problems
Investing Articles

2 dividend shares I’d avoid like the plague in today’s stock market

The UK stock market is full of high-yield dividend shares that could equate to a steady stream of passive income.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

£17,000 in savings? Here’s how I’d aim to turn that into a £29,548 annual second income!

Generating a sizeable second income can be life-enhancing and can be done from relatively small investments in high-dividend-paying stocks.

Read more »

Investing Articles

With as little as £300 a month invested, this stock could net £16,000 a year in passive income

Putting a few hundred pounds each month into the stock market could eventually generate a five-figure annual passive income, this…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

This dividend stock could pop next week!

This dividend stock happens to have one of the biggest dividend yields I've come across -- 10.7% -- but I'm…

Read more »

Investing Articles

Up 81%, can this FTSE 100 turnaround share keep surging?

This recovering retailer has been one of the FTSE's greatest performers over the past year. Royston Wild considers whether it…

Read more »

Happy couple showing relief at news
Investing Articles

£10,000 in savings? I’d buy 4 passive income shares to target a £100 per week second income!

By buying passive income shares today, I have a great chance to eventually make life-changing wealth. Here's how I'd invest…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

I think this may be an unmissable chance to buy an oversold UK share before it rallies hard

Harvey Jones piled into this beaten down UK share because it looks cheap and offers a sky-high yield. Now he's…

Read more »