The Motley Fool

How should I invest £10k? 2 reasons why Warren Buffett’s advice could be worthwhile

The value investing strategy pursued by Warren Buffett over recent decades has been highly effective in generating market-beating returns. It’s enabled him to become one of the wealthiest people in the world, and yet his style of investing is relatively simple and straightforward. In fact, any investor can implement his basic principles in order to boost their financial prospects.

With the world economy’s outlook highly uncertain at the present time, now could be an opportune moment to adopt Buffett’s strategy. It could boost your portfolio returns, and make it easier to grow a £10k investment – or any other amount you have available.

High returns

Perhaps the most obvious reason to follow Buffett’s value investing strategy is his track record of success. He started out with limited capital many years ago, and has gradually outperformed the S&P 500 in order to build significant wealth on a consistent basis.

With hindsight, some of his investment decisions seem obvious. In many cases, the companies he has purchased have gone on to become highly profitable and dominant businesses in their respective markets. However, being able to capitalise on them, and the opportunities they presented at the time of purchase, required a solid strategy focused on the quality of a company, as well as the price paid for it.

As such, a value investing strategy appears to be a means of generating high returns, as well as reducing overall risk through seeking a margin of safety in the price paid for a stock. Buffett’s track record of success is perhaps the best evidence of this.

Simplicity

Buying high-quality businesses while they trade on low valuations is a very simple concept that can be applied by any investor. Certainly, it requires discipline in terms of waiting for the right opportunities to come along. It also demands courage to go against the investment ‘herd’, in terms of purchasing shares while their outlook may be somewhat uncertain.

However, there are no complex equations or formulas required to invest like Buffett. All an investor requires is access to information, such as annual reports that are easily available online, as well as a long-term view that enables them to capitalise on the cyclicality of the stock market.

Investing opportunity

At present, there appear to be a number of FTSE 350 shares offering good value for money. The uncertainty surrounding the world economy’s outlook may mean investor sentiment is relatively weak, which could present buying opportunities for long-term investors.

As such, now could be the right time to focus on a value investing strategy in order to maximise your long-term growth potential. As Buffett’s success has showed, it’s possible to turn modest sums of money into significant wealth through utilising a simple strategy.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, “10 Steps To Making A Million In The Market”.

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide.

Simply click here for your free copy.

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.