2 Warren Buffett tips I'll be following when buying ASX shares in 2024

This year it could be important to stick to a plan.

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Legendary investor Warren Buffett has shared a number of exceptionally useful pieces of advice. I'm going to use (at least) two of his tips when buying ASX shares in 2024.

I'm not going to be as successful as Buffett, but his strategies could be extremely useful for my portfolio like they have been for Berkshire Hathaway.

With interest rates high, inflation is still higher than desired and share prices are much higher than where they were a year ago. Thus, I think we're in a trickier investment landscape.

Circle of competence

There are a wide range of businesses and sectors on the ASX. Some are fairly easy to get a grasp of, like (most) ASX retail shares, while others are complicated such as ASX biotech shares.

Warren Buffett's advice is to stick to your circle of competence. In other words, only invest in businesses you understand.

By sticking to what we can get our heads around, we'll understand the opportunity better, be able to evaluate the risks and have stronger convictions when the business gives updates (whether they're positive or negative).

Medical treatment development and resource exploration are two areas that take a lot of expertise (which I don't have) to understand. I avoided these industries even though some companies in those spaces have made big returns.

If I can avoid the blow-ups, then my portfolio's return will naturally benefit in 2024. I'm going to be cautious about businesses that have risen which I can't properly evaluate. That's why I'm not going to invest in CSL Limited (ASX: CSL) shares.  

Durable competitive advantages

The world is changing rapidly, with new ways of selling items or services, new ways of marketing them, different challenges and a shifting economic picture. New technology can change the picture, with some businesses benefiting from new tools, and others that are seeing their business models being challenged. Interestingly, Warren Buffett himself is wary of investing in technology.

I want to try to choose businesses that have strong economic moats that can survive and thrive through whatever happens next. These are businesses with advantages like a good brand, a patent, network effects, cost advantages and so on.

A competitive advantage won't necessarily lead to better investment returns, but it's a helpful factor.

I try to regularly share my opinions on which ASX shares I like the look of and have been buying. One of the latest investments that I have made is Johns Lyng Group Ltd (ASX: JLG), which has expertise in repairing and restoring properties after an insurable event like storms and fire. The company is demonstrating its credentials and client satisfaction with the rapid growth of its catastrophe division.

By following these two Warren Buffett tips in 2024, I think I'll be able to choose some great ASX shares where there's less danger of something going because it's a poor company or I didn't understand the specific risks properly.

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Motley Fool contributor Tristan Harrison has positions in Johns Lyng Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway, CSL, and Johns Lyng Group. The Motley Fool Australia has recommended Berkshire Hathaway, CSL, and Johns Lyng Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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