I’m no Warren Buffett, but I still reckon it is possible for ordinary investors to make a million from shares. That’s why I listen to the great man when running my own modest portfolio. He’s saved me from making a lot of basic mistakes.
What I like about the investment legend is that he wears his success lightly and he isn’t one for making vainglorious boasts.
Buffett is also hugely quotable. The ‘Sage of Omaha’ says complex things in ways people easily understand. Like this: “Remember that the stock market is a manic depressive.” This captures the ups and downs of stock market investing pretty nicely.
It’s not easy to make a million
When the market is up, it’s all too easy to get sucked into the euphoria. Suddenly, everybody reckons they can make a million from shares. Then when it crashes, we’re all down in the dumps and feel like giving up. Buffett is reminding me that this is normal. It’s how the stock market is. His quote helps me keep a cool head, and not get carried away either during the ups – or the downs.
Here’s another quote I have taken to heart. “In investing, it is not necessary to do extraordinary things to get extraordinary results.” I like this one, because I am not an extraordinary investor. There are loads of smarter people than me picking shares, and there always will be. I’m no investment genius, far from it. But I still believe that shares are the best way to build up my retirement savings, despite my humdrum talents.
I’m learning from Buffett
According to Buffett’s quote, that’s okay. I line my portfolio with a mix of low-cost FTSE 100 and FTSE 250 trackers and get international exposure through specialist investment trusts. Then I buy a blend of individual UK stocks, offering a combination of growth but in particular dividend income. I favour familiar FTSE 100 names, such as spirits giant Diageo, Lloyds Banking Group, and consumer giant Unilever.
Then I follow another Buffett mantra: “Our favourite holding period is forever.” I stick with them during the good times and bad, and hope that over the longer run, the former will outweigh the latter. That doesn’t mean I cling on to a loser regardless. I’ve taken some punishment over time but, overall, I’m comfortably ahead.
Here’s another way Buffett helps me keep a level head. He said: “Forecasts may tell you a great deal about the forecaster, they tell you nothing about the future.” As a result, I don’t try to second-guess stock market movements. I ignore the doomsayers claiming we are heading for the greatest share price meltdown in history. Just as I shun those who proclaim we’re on the brink of the next bull market. Both usually have something to sell.
The truth is, nobody knows where the market will go next. Not even Buffett. He spends his energies looking for great companies instead. I may not get close to making that million, but I’m a lot richer from listening to him.