Over several decades, Warren Buffettâs Berkshire Hathaway has beaten the market with some incredible gains.
The good news is that so much is known about Buffettâs investment style that it is easy for investors to replicate his strategies with ASX shares.
And while this doesnât mean youâre guaranteed to generate the same level of returns as the Oracle of Omaha, it certainly puts you in a position to grow your wealth over the long term.
With that in mind, here are a couple of ways you can invest like Warren Buffett with ASX shares:
Long term focus
Buffett is well-known for taking a long-term perspective when making investments. Rather than make short-term trades, he buys shares âon the assumption that they could close the market the next day and not reopen it for five years”.
This allows investors to benefit from compounding. This is something that Buffett benefits from today, with an estimated 90% of his wealth being generated after his 65th birthday.
Stressing the importance of compounding, Buffettâs partner in crime at Berkshire Hathaway, Charlie Munger, once commented:
The first rule of compounding: Never interrupt it unnecessarily.
Buy wonderful ASX shares at a fair price
Rather than chasing after the latest hot stock, Buffett looks for wonderful companies that are trading at fair prices. Wonderful companies are those that have strong competitive advantages and are run by competent management. He famously quipped:
It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
In respect to competitive advantages or moats, Buffett spoke about how important it is for a company to have one in his 2007 letter to shareholders. He explained:
A truly great business must have an enduring “moat” that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business âcastleâ that is earning high returns. Therefore a formidable barrier such as a companyâs being the lowcost producer (GEICO, Costco) or possessing a powerful world-wide brand (Coca-Cola, Gillette, American Express) is essential for sustained success. Business history is filled with âRoman Candles”, companies whose moats proved illusory and were soon crossed.
Overall, if you follow Buffettâs strategy, I believe you have a good chance of generating solid returns over the long term with ASX shares.
The post I would follow Warren Buffett’s advice when buying ASX shares in 2023 appeared first on The Motley Fool Australia.
Despite what the ‘experts’ may say…
You may have heard some ‘experts’ tell you stock picking is best left to the ‘big boys’. That everyday investors should stay away if we know what’s good for us.
However, for anyone who loves the idea of proving these ‘experts’ dead wrong, then you may want to check this out… In fact…
I think 5 years from now, you’ll probably wish you’d grabbed these stocks.
Get all the details here.
See The 5 Stocks
*Returns as of January 5 2023
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More reading
- What do IAG shares have in common with Warren Buffett?
- Starting 2023 with no savings? Iâd follow Warren Buffett and start building wealth
- I would follow Warren Buffettâs advice when buying ASX shares in 2023
- Iâm listening to Warren Buffett and buying cheap ASX shares
- What can ASX 200 investors learn from Warren Buffett’s big moves in 2022?
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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