In my twenties, I went through long periods of having little in the way of savings. Things improved by the time I reached 30, but if they hadn’t, it wouldn’t have been a disaster.
If I had no savings at 30 and was trying to start from scratch to both save and invest, I’d follow the wisdom of legendary investor Warren Buffett. He actually made most of his wealth when he was much older. Now in his nineties, there’s plenty I can learn from him.
Having to start somewhere
The first point I completely agree with is when Buffett said that “predicting the rain doesn’t count, building arks does.” Particularly at the moment, there could be the sense of not wanting to invest, fearing imminent economic storms. However, history shows that trying to perfectly time the market is pretty much impossible.
Rather, if I was starting over, I’d cut back on some of my spending habits and start to invest now. Sure, I can’t say that right now is the best or worst time to start. But trying to predict when to start isn’t going to help me.
Instead, I can try and build an investment ark. This means that I can start by using funds to invest in defensive stocks, such as supermarkets and utility companies.
Starting small, aiming large
Another comment I like from Buffett is: “I don’t look to jump over 7-foot bars; I look around for 1-foot bars that I can step over.”
What I take from this is that it’s daunting to try and start investing with no savings. Obviously, I have income so I can find money to put to work. But it might not be that much in the beginning.
Comparing myself to others that are making thousands of pounds in profit from stock picks can be very demoralising. Especially in the world of social media, so-called experts are often portrayed as the perfect investor. In reality, taking small steps to begin with (1-foot bars) is the way to go. If I try and jump too high too early, it could end in disaster.
Investing for as long as Warren Buffett does
Finally, a great piece of advice offered is “our favourite holding period is forever”. The holding period refers to how long I keep a stock in my portfolio before selling it.
Back when I had no savings, I think that if I bought a stock and saw it jump 10% or 20% in a short space of time, I’d probably rush to sell it. Banking the profit is never a bad thing, but I didn’t have the long-term time horizon.
If I own solid companies that have long-term growth potential, the chances are that I’m going to enjoy larger profits by owning the stock for years rather than weeks.
All three points from Buffett are ones I try and imitate now, regardless of my level of savings.