Warren Buffett has made a considerable fortune investing in the stock market. His performance has earned him the reputation of being one of the best investors of all time. And he’s made most of his money when others have been running scared. That’s why I think it’s worth following Buffett’s advice to take advantage of the recent stock market crash.
Warren Buffett’s most important trait
Buying investments in the middle of a stock market crash can seem like a daunting idea. No one wants to see their hard-earned money evaporate overnight. But this is just the approach Buffett has used many times over the years to get rich.
The investor’s secret is to be greedy when others are fearful. He has a list of stocks he’d like to buy and then waits until they’re on offer before he takes the plunge.
This approach requires patience. But, as we can see from Buffett’s performance over the past few decades, it can produce tremendous returns. Therefore, I think one would benefit from following the billionaire investor’s strategy.
Waiting is only part of the approach. Finding stocks is equally as important. Here he’s excelled as well. He’s been invested in some of the best-performing stocks of all-time, and that wasn’t by accident.
Finding stock market crash bargains
Buffett will only invest in companies that he knows and understands. That means he tends to stick with high-quality blue-chip companies, which have world-leading brands and economies of scale. I don’t think he’s ever invested in an unknown mining minnow or small-cap biotech stock.
These latter companies can be highly risky and, more often than not, investors end up losing money. Buffett wants to avoid losing money at all costs. That’s why he stays away from risky businesses.
In my opinion, no one can go wrong following the same approach. High-quality blue-chip stocks such as Unilever and Reckitt Benckiser may not offer the sort of multi-bagger potential as some AIM-listed small-caps. However, they have a long track record of producing steady positive returns for investors.
If investors are erious about building wealth and getting rich, I believe it’s better to seek out steady positive returns over the long term, rather than sudden profits, or the potential for large losses.
The bottom line
Buffett has made a fortune buying stocks at depressed levels. He looks for the market’s best companies. And then waits for the perfect opportunity to buy these stocks.
Anyone can follow this approach. By focusing on companies such as Unilever, and waiting for the right opportunity to buy after a stock market crash, one could potentially generate large total returns in the long term. This may help you build a sizable financial nest egg.
Avoiding losses is just as important as making money for to those wishing to get rich. So investing in high-quality blue-chip companies means the potential for a massive capital loss is relatively low.
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Rupert Hargreaves owns shares in Unilever. The Motley Fool UK has recommended Unilever. 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.