Over several decades, Warren Buffett's Berkshire Hathaway has beaten the market with some incredible gains.
The good news is that so much is known about Buffett's investment style that it is easy for investors to replicate his strategies with ASX shares.
And while this doesn't mean you're guaranteed to generate the same level of returns as the Oracle of Omaha, it certainly puts you in a position to grow your wealth over the long term.
With that in mind, here are a couple of ways you can invest like Warren Buffett with ASX shares:
Long term focus
Buffett is well-known for taking a long-term perspective when making investments. Rather than make short-term trades, he buys shares "on the assumption that they could close the market the next day and not reopen it for five years".
This allows investors to benefit from compounding. This is something that Buffett benefits from today, with an estimated 90% of his wealth being generated after his 65th birthday.
Stressing the importance of compounding, Buffett's partner in crime at Berkshire Hathaway, Charlie Munger, once commented:
The first rule of compounding: Never interrupt it unnecessarily.
Buy wonderful ASX shares at a fair price
Rather than chasing after the latest hot stock, Buffett looks for wonderful companies that are trading at fair prices. Wonderful companies are those that have strong competitive advantages and are run by competent management. He famously quipped:
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
In respect to competitive advantages or moats, Buffett spoke about how important it is for a company to have one in his 2007 letter to shareholders. He explained:
A truly great business must have an enduring "moat" that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business "castle" that is earning high returns. Therefore a formidable barrier such as a company's being the lowcost producer (GEICO, Costco) or possessing a powerful world-wide brand (Coca-Cola, Gillette, American Express) is essential for sustained success. Business history is filled with "Roman Candles", companies whose moats proved illusory and were soon crossed.
Overall, if you follow Buffett's strategy, I believe you have a good chance of generating solid returns over the long term with ASX shares.
