Here’s how I’d invest using the Warren Buffett method to make a million

Using Warren Buffett’s investing methods could be a sound means of generating high returns, in my view. It may increase an investor’s chances of making a million.

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.

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 investing methods have enabled him to become one of the most successful investors of all time.

Fortunately for other investors, his strategy is well-known and relatively simple. As such, it can be successfully implemented to potentially deliver higher returns in the long run.

With many sound businesses trading at low prices following the stock market crash, there may be opportunities to make impressive returns in a likely stock market recovery. An investor may even be able to make a million.

Warren Buffett’s focus on economic moats

Warren Buffett doesn’t only consider the price of a stock before investing money in it. In fact, his major consideration has historically been the competitive position of a business, and whether it has a clear and sustainable advantage over its peers.

A company that has a wide economic moat — as Buffett describes as having a competitive advantage — may be able to deliver more robust profit growth in a range of market conditions than its sector peers.

Economic moats may become even more important over the coming years. The full impact of the coronavirus pandemic remains a known unknown. As such, only those businesses that have a clear competitive advantage over their peers may be able to deliver rising profitability. Such companies may, for example, have unique products, brand loyalty or cost advantages. This means they’re highly attractive to investors such as Warren Buffett at the present time.

Confidence in a long-term stock market recovery

Warren Buffett has historically been optimistic about the prospects for a stock market recovery after even the very worst periods for the economy. For example, he was investing money in stocks following the global financial crisis when other investors were selling. Indeed, he’s always had confidence in the capacity of share prices to recover from their lows. Especially as economic performances improve, profits rise and investor sentiment strengthens.

Therefore, investors who adopt a similar approach may benefit from a likely stock market rally. So don’t worrying about how the FTSE 100 and FTSE 250 may perform over the next few months. A more profitable move may be to consider how their price levels are likely to change over the coming years. This may enable an investor to more easily capitalise on low stock market valuations. Just as Warren Buffett has done over many years.

Making a million

Clearly, following Warren Buffett and making a portfolio valued in the tens of billions isn’t possible for the vast majority of investors. However, obtaining a portfolio valued at over a million could be a more realistic aim than many investors realise.

Even if an investor obtains the same 8% annual total return as the FTSE 250 has delivered in the past 20 years, a £750 monthly investment would become worth over £1m within 30 years. But it may be possible to achieve the goal of a £1m portfolio much sooner. Investors just have to focus on economic moats and have a long-term timeframe, 

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.

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

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »