Warren Buffett is one of the best investors alive today. He’s been in the game for over 80 years. During that time, he’s built a fortune of around $120bn.
Buffett makes it look easy. But it’s far from. And many have tried to replicate his success and failed. That said, while investors may not be able to build a fortune as large as Buffett’s, they most certainly can follow his advice and apply it to boost their own performance.
This wisdom will be especially useful for individuals with no significant savings stashed away. And while starting with a lump sum of cash gives investors a head start, it’s possible to build wealth without any cash reserves.
If I were in this position, here are two Buffett tips I’d use to get started.
Ready to capitalise
In my opinion, the best piece of advice provided by the ‘Oracle of Omaha’ is when he said that it’s good to “be greedy when others are fearful”. What he means is to capitalise on opportunities in the market that other investors are failing to realise.
This message is especially relevant right now. We’ve seen large volatility in the stock market in the last few years as plenty of companies have felt the impact of events such as the pandemic. Last year saw the FTSE 100 fall by around half a percent. So far in 2023, it’s up less than half a percent. With that, many investors have exited their positions in stocks in favour of cash.
But I’m not worried about this. In fact, it suits me. It means I can buy quality companies for cheaper prices. For example, I’ve used this fall as an opportunity to top up my position in Legal & General, which is down 5% in the last 12 months. I’ve also purchased Safestore, which is down 14% in the same timeframe, and with a price-to-earnings ratio of just six.
Invest in what you know
While I think there are ample opportunities in the market right now, it’s also smart to follow Buffett’s advice in taking a disciplined approach. The stock market is home to thousands of companies, and it can be difficult to funnel through them to find investment opportunities. But by doing my homework, I’d be more confident with the decisions I make. With little savings, I’d want to make sure I put myself in the best position to maximise my gains.
To start, I’d copy Buffett’s tactic to invest in companies and industries that are easy to understand. He once stated investors should be able to write down exactly why they plan to invest in a business. Doing this can refine my search.
From there, I’d do further due diligence. This would include assessing the financial health of companies by looking at their balance sheet for any potential issues, such as high levels of debt. By doing this, I’d be confident I’d be making more informed decisions.
No time like the present
Having little savings wouldn’t deter me from investing. Instead, I think now is a great time to start. By doing proper research and being ready to pounce on opportunities other investors may be passing on, I’m confident I could build wealth.
