With no savings at 40, I’d listen to billionaire Warren Buffett and build wealth

Investing legend Warren Buffett is well worth learning from, whether by an investor who is just starting out or who has been around the block.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Bearded man writing on notepad in front of computer

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.

After putting money to work in the stock market for over seven decades, Warren Buffett is arguably the world’s greatest investor.

This longevity has enabled incredible compounding to take place. An investment of $100 in Buffett’s holding company, Berkshire Hathaway, in 1965 would now be worth north of $3.5m.

The Oracle of Omaha has repeatedly shared his investing philosophy with the world. For anyone willing to listen, he has essentially laid down a blueprint to help people succeed in the stock market.

Indeed, investor Mohnish Pabrai became a billionaire by meticulously studying and cloning Buffett’s investing formula. “I’m a shameless copycat”, Pabrai once said.

Never too late

The good news is that anyone can start building wealth in the stock market, even those starting out at 40 with no savings.

For example, let’s say I was able to get my finances in order and start investing £800 a month in stocks.

Assuming market average returns of 8%, those regular contributions would compound into an incredible £1,034,669 after 29 years (excluding platform fees).

Greed and fear

A famous Warren Buffett quote is: “Be fearful when others are greedy. Be greedy when others are fearful.”

In essence, he is advising investors to be cautious when the market is rocketing higher, and to be opportunistic when it is crashing.

It is a contrarian way to invest because most people do the opposite. They become greedy at the top of the market and buy, then fearful at the bottom and sell.

Taking action

One way I could use this in practice is by only investing £600 of my money every month. I could put the other £200 into an easy-access savings account.

This way, I’d have some spare capital to deploy when stocks start crashing. Nobody knows when that will happen, but it is certain to take place at some point. History tells us that.

If a crash happens three years after I start investing, then I’d have £7,200 to play with.

Intuitive Surgical

One stock I’d buy in 2024 if there was a market crash is Intuitive Surgical (NASDAQ: ISRG).

This firm makes minimally invasive surgical robots called da Vinci. And it now has an installed base of 8,887 of these surgical systems, as of 31 March.

In Q1, worldwide da Vinci procedures grew approximately 16% year on year while sales rose 11% to $1.9bn.

The company’s latest da Vinci 5 robot has been built to enable the future of AI and machine learning in surgery. With over 10,000 times the computing power of the previous model, the system will evolve over time through software and enhanced capabilities. In other words, it will self-improve.

Intuitive is a wonderful company and the stock is up 113% in five years and 21,050% in 20.

The global trend towards more robot-assisted surgery is well underway. Yet the firm seems to be barely scratching the surface of its long-term opportunity in the huge healthcare markets of China and India.

The problem here is the stock’s premium valuation already reflects this rosy outlook. It is trading at a forward price-to-earnings multiple of 58.

That is too pricey for me to feel safe loading up today. But if Intuitive shares get thrown out with the bathwater during a crash, then I’ll start getting greedy.

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.

Ben McPoland has positions in Intuitive Surgical. The Motley Fool UK has recommended Intuitive Surgical. 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

Dividend Shares

£3k in savings? Investors could consider putting it here for juicy second income

Jon Smith talks through how investors could buy dividend stocks with yield potential in excess of 6.5% for second income

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

Why the boohoo share price soared by almost 14% in November

Is troubled online fashion retailer boohoo beginning a turnaround that may cause the share price to rocket through 2025 and…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

Here’s how saving £5.40 a day could net me £1,971 yearly passive income for life

The price of a cup of coffee seems to have broken the £5 mark. Is it time to put that…

Read more »

Investing Articles

2 top FTSE 100 stocks surging to record highs (hint — not Rolls-Royce)!

Ben McPoland takes a closer look at a pair of high-performing FTSE 100 stocks that continue to enrich long-term shareholders.

Read more »

Investing Articles

A cheap FTSE 100 share to consider buying for the next 10 years!

This FTSE 100 share has pride of place in my portfolio. Here's why I think it could be a top…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Down 44% in 2 months! Is this FTSE 250 green energy pioneer priced too cheaply?

After a sharp tumble in recent months, this FTSE 250 company with a growing order book is almost 90% below…

Read more »

Investing Articles

Investing a £20k Stocks and Shares ISA in this high-yielder might give me a £2,000 annual income

Harvey Jones is now wondering whether to pour his entire Stocks and Shares ISA allowance into a single FTSE 100…

Read more »

Investing Articles

Saving £20k in an ISA? Here’s how I’m aiming to turn that into a stunning £2,035 monthly passive income

Harvey Jones is keen to build a high and rising passive income by investing in a balanced spread of top…

Read more »