Warren Buffett is famous for being one of the most successful investors of all time. He may now be well into his 90s. But Buffett has never been richer and more influential. And that's thanks to his decades of successful investing through his company Berkshire Hathaway Inc.
Today's Buffett's wealth sits at a mind-boggling US$116 billion. As such, we investors have 116 billion reasons to learn as much as possible from this legendary investor on how to build wealth on the share market.
Buffett is well known for his long-term investing strategy. He has held some of his stock holdings at Berkshire since the 1960s and memorably told investors that his favourite length of time to hold a stock as an investment is "forever".
This is a mindset that I try and bring into my own investing practice.
Building wealth, Berkshire-style
There are many, many ways that this Buffett mindset can improve an investor's long-term wealth. For one, it helps take the emotional toll out of investing. If an investor is constantly worried about their shares falling in value on the whims of the market, it can lead to poor investment decisions.
The investor might try and anticipate what the markets might do in the future and act accordingly. But they might do so only to be caught off guard by the market's inherent short-term irrationality.
A far better way to think about buying shares as an investment is to equate the decision with buying a house. Very few people buy a home with the intent of flipping it in just a few months.
The real value of this type of investment has always been realised by holding it over a long period of time. That's the approach Buffett takes when buying shares. Yet it is one that is too often scoffed at.
How to invest like Warren Buffett
Buffett has never made money by dipping in and out of shares. He buys a quality company and retains his ownership of it as long as it continues to prosper and grow. By doing this over decades, he has been able to harness the full power of compounding.
It took Buffett around 50 years to make his first billion. But in the following 42 years, he has turned that billion into US$116 billion.
That's why I try and only invest in companies that I comfortably feel have a real chance at growing exponentially larger over the coming decades. Some of my favourite investments, for this reason, include Apple, Tesla, Alphabet, Washington H Soul Pattinson and Co Ltd (ASX: SOL), and Wesfarmers Ltd (ASX: WES).
Like Buffett, I fully intend to own these shares for the rest of my life. Sure, circumstances do change, and maybe I will be forced to sell at least one if it takes a turn for the worse, just as Buffett was forced to sell his airline stocks back in 2020. But today, I see the potential of these companies as worthy of holding forever.
But don't take this wisdom from me, take it from Buffett himself. Here are a few quotes to finish up on which summarises his long-term mindset:
- "Buy a stock the way you would buy a house. Understand and like it such that you'd be content to own it in the absence of any market."
- "Time is the friend of the wonderful company, the enemy of the mediocre."
- "If you aren't thinking about owning a stock for 10 years, don't even think about owning it for 10 minutes."
- "All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies."
- "Successful investing takes time, discipline, and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant."
