Billionaire Warren Buffett’s lifetime of success with investing inspires me. He’s 90 years old now and still heads his masterpiece conglomerate, Berkshire Hathaway. It’s clear he loves the activity of investing. And he appears to have no plans to retire.
I reckon it makes sense for investors to learn from a man who has achieved so much in the game. And over the years, Buffett has made it easy for us to learn from him. That’s because he freely peppers interviews, books and his annual letters to Berkshire shareholders with little nuggets of wisdom.
Generously, his shareholder letters are available for all to read on the Berkshire Hathaway website.
Warren Buffett’s patient approach
But we don’t need to be obsessive about investing to achieve decent results. And Buffett has told us that several times. For example, he once said: “The stock market is designed to transfer money from the active to the patient.”
So that tells me that frenetic stock trading perhaps isn’t the best way to proceed. Instead, I reckon it’s important to put a lot of effort into researching an investment opportunity in the first place. But when I’m sure the underlying business is a good one with attractive growth prospects, I should relax after buying the stock.
Businesses will take time to roll out operational progress. And that can mean nothing much may happen with stocks for some time after my purchase. Indeed, that’s one of Buffett’s favourite themes. He’s on record as saying: “We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.”
And I think that’s comforting to know. Buffett has done so well over the years by essentially doing very little beyond his initial research. Apart from anything else, that makes it possible to blend a successful investing career with a good work/life balance.
Less can be more
Buffett drove home the point when he said: “Wall Street makes its money on activity, investors make theirs on inactivity.” When it comes to investing, less really can be more.
So, I’d use Buffett’s wisdom to inform my approach to investing £3,000 in stocks today. Firstly, I’d aim to divide the money between three different companies. For me, £1,000 is the bottom limit for an investment in an individual stock. I think that sum makes the transaction costs worthwhile.
Secondly, I’d work hard with my research. The aim would be to find quality businesses with decent forward-looking prospects and a fair valuation.
And the third step would be to hold my stocks as the underlying operational progress in the business unfolds. But as Buffett suggests, I’ll be prepared to wait for as long as it takes.
Of course, even after following Buffett’s advice, a decent investment outcome isn’t guaranteed. All stocks carry risks. But I reckon the odds of success will increase if I research well and invest patiently, just like Buffett.