No savings in 2024? I’d use the Warren Buffett method to start building wealth

Almost half of the Britain’s population has less than £1,000 in savings. But could following Warren Buffett’s strategy help change that?

| More on:
Abstract 3d arrows with rocket

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.

Warren Buffett’s method of investing may prove to be a critical tool for families across Britain. With inflation sending food and energy prices skyrocketing, many households have been forced to dip into their savings to cover living costs. And, shockingly, an estimated 46% of Britons now have less than £1,000 of savings in 2024. And roughly 16% have nothing in the bank at all.

Sadly, there are no instant, short-term solutions to magically change these figures. At least, none that doesn’t involve an exceptional amount of risk. However, in the long run, following in Buffett’s footsteps could lead families into a significantly stronger financial position. Here’s how.

Learning from a legend

Today, Buffett’s one of the wealthiest men on the planet. But that wasn’t always the case. In fact, in his early life, he grew up in poverty before his parents eventually climbed into the middle class. And when he started his investment journey, he didn’t have much capital to get the ball rolling.

Despite these handicaps, he’s managed to create a fortune worth over $130bn in the space of one lifetime. Replicating this performance is far easier said than done. After all, many have tried and failed. But while it’s unlikely that an investor will manage to mimic his near-20% annualised returns, following his advice could still put individuals on the path of higher wealth.

When it comes to investing, even a small chunk of change can eventually compound into a significant sum of capital. So what’s the secret sauce?

It’s actually pretty straightforward – invest in wonderful businesses at fair prices and hold them for the long run. It’s a bit anti-climactic. But history has proven countless times that investing for the long term often yields some of the best returns while keeping risk in check.

What’s a wonderful business to consider today?

Finding a terrific company to buy and hold is obviously easier said than done. After all, if it was obvious, everyone would do it. Unfortunately, it’s quite a difficult question to answer due to the personal nature of investing. Everyone has different risk tolerances, time horizons, and general emotional temperament.

Having said that, one Buffett-style UK stock from my portfolio that may be worth exploring further is Games Workshop (LSE:GAW). Selling plastic miniatures may not sound like a lucrative business. Yet the company has grown into a multi-billion pound empire with enormous quantities of pricing power and a cult-like following from customers that puts Apple to task.

It’s ultimately translated into impressive double-digit profit margins, and its Warhammer brands, specifically Warhammer 40,000, are now the biggest in the global tabletop wargaming space. Of course, the firm isn’t without its risks.

The cost of plastic is rising courtesy of inflation and pressure from environmental regulations. So far, management’s been successfully passing on this expense to customers, maintaining profitability. But with a starter army box now priced at £95, the high cost of the hobby may already be prohibitively expensive for newcomers.

Nevertheless, that’s been a concern for years now. And demand continues to surge, despite the higher prices. Pairing this with a fair price-to-earnings (P/E) ratio of 22 compared to the group’s double-digit growth makes it a stock I’m happy to hold for long-term gains.

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.

Zaven Boyrazian has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Apple and Games Workshop Group 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

Investing Articles

Is Nvidia stock set for a massive crash?

Nvidia stock is up 3,500% in five years. So has AI fever sent it ridiculously high now, or are we…

Read more »

Investing Articles

Turning a £20k ISA into a stunning £38,023 a year passive income

Harvey Jones says investing regular sums in a Stocks and Shares ISA is a brilliant way of building up a…

Read more »

Growth Shares

Growth stock YouGov just fell 46%. Time to buy?

YouGov’s share price just fell from 820p to 440p after a poor trading update. Is now a good time to…

Read more »

Investing Articles

2 mouthwatering FTSE growth stocks I’d buy and hold for 10 years

Growth stocks purchased today could be the gateway to many years of capital growth and returns. Here are two picks…

Read more »

Investing Articles

Can the IAG share price really be as dirt cheap as it looks?

While most shares have recovered since the Covid days, the IAG share price is staying stuck to rock bottom. Surely…

Read more »

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »