No savings at 30? Use Warren Buffett’s golden rule to build wealth through investing

When it comes to investing, Warren Buffett’s advice reigns supreme. Dr James Fox explains how investors can build wealth with one golden rule.

| 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.

Young black man looking at phone while on the London Overground

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.

As I write, Warren Buffett’s net worth is thought to be just in excess of $140bn. So it may come as no surprise to hear that he’s known as the ‘Oracle of Omaha’, with investors around the world eager to hear and interpret his every word. And despite his unimaginable wealth, his teachings are incredibly valuable for novice investors.

No savings? No worries

Many Britons have no savings at 30. But while it may be common, it doesn’t mean it’s happy situation to be in. Conventional wisdom tells us we should have enough savings for at least six months. Beyond building a small reserve, many of us want to build wealth, and investing regularly and over a sustained period of time, is one of the best and most popular ways of doing it.

Thankfully, Britons start can investing with very little money at all. Investors could look to put aside as little as £50 a month from our salaries in order to get started. Or if an investing were willing to make cutbacks in other parts of our lives — such as a daily coffee out — that £50 figure could be expanded upon.

Should you invest £1,000 in Unilever right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Unilever made the list?

See the 6 stocks

Here’s a graph showing how £200 monthly contributions compound over 30 years at annual rates of 5%, 10%, and 15%. The differences in growth become more pronounced over time due to the power of compounding, with the higher rate reaching £1.4m.

Buffett’s golden rule

So, what does this have to do with Warren Buffett? Well, it’s simply about how we invest. Many novice investors lose money chasing big returns. And that’s why Buffett’s first rule of investing is “don’t lose money”. The thing is, if an investors makes a poor investment decision and the value of that asset — stock — goes down 50%, the investment has to go 100% up to get back to where it started.

It’s certainly easier said than done — don’t lose money. However, it underscores the need to make researched investment decisions and not simply follow our gut or even the crowd. This could mean using quantitative models to build a rationale for our investments.

A strong investment to consider?

One stock potentially worthy of consideration is Blue Bird Corporation (NASDAQ:BLBD). The American company is a leading designer and manufacturer of school buses in North America. And it has benefitted from the electrification agenda, supported by federal subsidies.

Some recent pullback in the share price may be associated with President-elect Donald Trump’s likely repeal of the clean energy/ EV provisions in the Inflation Reduction Act. This does create some risks for shareholders.

However, the company boasts a strong backlog of orders, a robust balance sheet, and impressive profitability grades. Moreover, the valuation data is highly attractive. The stock is trading at 9.7 times forward earnings and has a price-to-earnings-to-growth (PEG) ratio of 0.77. It’s also a brand that customers know, having been founded in 1927. That counts for a lot sometimes.

Those considering it should bear in mind that buying US stocks will mean that their investments are also subject to exchange rate fluctuations. Moreover, they’ll need to apply for a W8-BEN which will allow them to buy and trade US-listed stocks. This needs updating periodically but it’s still simple and I don’t think it should put anyone off US investing.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

James Fox has position in Blue Bird. The Motley Fool UK has no position in any of the shares mentioned. 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

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

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

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »