I haven’t reached 40 yet, but it’s definitely on the horizon. In the years to come, I might find myself dealing with unexpected financial drains on my savings. If this is the case, I could hit 40 and have little in the way of savings. Yet with plenty of time before I get to retirement age, here’s how I’d follow legendary investor Warren Buffett to build up my wealth in the years that follow.
Warren Buffet’s consumer favourites
One of the great successes for Buffett over the years has been to keep things simple and invest in everyday favourite brands. For example, Coca-Cola. Via his investment company (Berkshire Hathaway), Buffett first took a stake in the beverage behemoth in 1988.
This position has grown over the years, as has the Coca-Cola share price. The business model is simple, with the star brand having mass appeal and a relatively low price point. This means that consumer demand is always there, even when we go through different stages of the economic cycle.
Another case in point is Kraft Heinz. The business merged back in 2015 to take on new brands and continues to sell consumer staples. If I go and open my fridge right now, I’d pretty much guarantee I have a bottle of something produced by this global conglomerate.
Buffett has been a shareholder of Kraft Heinz for a long time as well. So my takeaway here is to try not to over complicate my investment strategy as I work to build wealth. Sure, there’s a place for me to allocate some of my money to a hot growth stock. But I can’t fault the consistency of the above ideas.
Pick stocks for the long term
Aside from the two stocks mentioned above, Buffett has held other companies for a long time. Another example is American Express. The US financial services company was a stock that he first started to buy back in 1993.
The fact that he buys and holds firms for such a long period can help me if I reach 40 with no savings. This is because I don’t need to feel that I have to force things to generate wealth quickly. Of course, I’d love to cut back on my spending by £200 in the first month and turn this into £100k by the next month. But this just isn’t realistic.
Rather, by cutting down my spending in order to have savings to invest in these Warren Buffett stocks, I can build my wealth over time. Sure, it’s going to take me longer to reach a position where I’m happy. But I feel it’s a much safer route with a higher chance of generating profits. After all, at the start of 1993 the American Express share price was trading around $7. It’s now at $153. I’ll let you do the math!
It’s true, I didn’t buy the three above stocks when Buffett initially did. In fact, I don’t currently own any of them in my portfolio. I don’t have the spare cash right now to buy, but would happily purchase the stocks when I have better liquidity next year.
