You could say that Warren Buffett knows a thing or two about investing. He has been buying stocks for decades as chairman and CEO of Berkshire Hathaway — a conglomerate worth more than $610 billion. Buffett’s personal wealth is around $100 billion.
Luckily for the investment community as a whole, Buffett isn’t shy about sharing his investing expertise. While many believe he has a unique gift for seeing trade value, some aspects of his strategy are easy enough for novice investors to copy. Here are four such simple investment strategies you can try today.
1. Invest in the S&P 500
In a 2017 interview, Buffett advised retirement savers to invest in a low-cost company regularly. S&P500 index fund. In his words, “I think it’s the thing that makes the most sense practically all the time.”
S&P 500 index funds invest in stocks of the S&P 500. They are the largest and most successful publicly traded companies in the United States. As a group, they won’t make you a millionaire overnight, but they have generated solid growth over time. Historically, the S&P 500 has risen about 7% per year, excluding inflation.
S&P 500 index funds are readily available from any brokerage. Some brokerages even support split purchases on these funds. It’s a good option when you’re on a tight budget.
Note that Buffett specifically recommends low-cost funds. These are funds with low expense ratios, which represents the proportion of your invested capital devoted to fund expenses.
An expense ratio of 0.03%, for example, equates to $3 in expenses per year for every $10,000 invested. The lower the expense ratio, the more important the return on the underlying investments is to your bottom line.
2. Focus on the long term
You can invest for profits quickly or over time. Buffett follows the latter strategy. He said his favorite detention period was forever.
Some stocks are more suitable than others for long holding periods. Buffett likes established companies with solid track records in various economic climates – companies that have persistence. Blue chip companies and S&P 500 stocks usually do the trick.
On the other hand, hot stocks, start-ups, and radical innovators are usually outside Buffett’s wheelhouse. There are opportunities in these categories, but making profits may depend more on trading than holding.
3. Look beyond market turbulence
Buffett is committed to his long-term approach and doesn’t let turbulent markets shake his resolve. When asked for advice on managing market volatility, Buffett said, “Don’t watch the market too closely.”
The beauty of long-term investing is that it forces you to do nothing when stock prices fall all over the place. Remember that you have invested in sustainable businesses. Until these companies have fundamentally changed, waiting is your best decision. Keeping your portfolio intact positions you for gains once the bear market reverses.
4. Go against the grain
Buffett said his investment goal is “to be afraid when others are greedy and only to be greedy when others are afraid.” In other words, be cautious when the market is hot and look for opportunities when the market is weak.
For Buffett, opportunity often means buying good stocks at lower prices. It did just that in the first quarter of 2022 during the big tech sale. As other investors reduced their tech exposure, Buffett acquired 3.7 million shares of Appleone of his favorite stocks.
Invest like Buffett
Buffett prefers big companies and long, uninterrupted holding periods. He also likes to operate against prevailing market sentiment. Although these methods require persistence, they are simple enough for any investor to copy.
Once you’ve implemented the simplest Buffett tactics, then you can wait for your gains to show up over time. Decades from now, you will remember this day because the time when making money in the stock market just got a whole lot easier.