For many people, the stock market is little different than gambling. Short-term volatility, coupled with uncertainty about its future prospects, can lead to questions about whether luck plays the biggest role in making a million through investing in shares.
Warren Buffett’s success over a long period, though, shows that luck may not be as important as some people believe. After all, he has been able to generate billions over decades on his way to becoming one of the richest people in the world.
As such, through following an investment strategy similar to Buffett’s, it may be possible for you to make £1m through buying FTSE 100 shares.
Perhaps the most important part of investing is to take a long-term view. Buffett, of course, has stated that his favourite holding period is “forever“. In other words, he sticks with the companies in which he is a shareholder, and does not seek to sell profitable investments in order to buy other companies.
This could be key to improving your reward potential from investing in FTSE 100 shares. After all, predicting the share price movements of any company over a short-term time period is incredibly challenging, if not impossible, to achieve on a regular basis.
Over the short run, therefore, profiting from the stock market could be considered as being dependent on luck. But, when it comes to investing over the long run, luck is likely to play a much smaller part in the chances of an investor making a million, since factors such as the price paid, the performance of the economy and a company’s strategy are likely to come into play.
Warren Buffett follows a value investing strategy. This means that he seeks to buy high-quality businesses while they trade at fair prices. While some investors may agree or disagree with his strategy, Buffett has remained true to it throughout his career. Certainly, he may have made subtle changes to his investment style as he has learned lessons through the years. But, his overarching value investment strategy has remained intact throughout his career.
This could be key to any investor’s success. While some investors buy different companies using different reasonings, and may change their strategy regularly, successful investors are likely to stick with overarching principles in the long run. This may increase their chances of being successful, since they have a stable platform from which to unearth the best opportunities at a given moment.
By taking a long-term view of the stock market and sticking with a specific strategy, it may be possible to generate high returns. After all, the FTSE 100 has a track record of growth, as well as recovering fully from any downturns. Through adopting similar principles to those followed by Warren Buffett, it may be possible to reduce the amount of luck required in order to generate high returns on shares, and in doing so boost your chances of making a million.
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Peter Stephens has no position in any of the shares mentioned. 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.