Becoming a multibillionaire like Warren Buffett is unlikely for most. However, by using his methods, I believe it’s possible to start with just £500 and create substantial wealth over a lifetime.
First I meed a suitable share-dealing account designed to maximise my returns. I believe the wisest route is a Stocks and Shares ISA. With this UK government-backed programme, investors pay no tax on price gains and dividends. We can invest up to £20,000 per year in our portfolios via an ISA.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Picking investments to beat the market
At The Motley Fool, we believe we can beat the general market by picking individual shares. My own very ambitious goal is to achieve roughly 15% annual compound interest over the next 10 years and beyond. I buy a lot of US shares as well as UK and European ones, and for comparison, the most common US general market benchmark is the S&P 500. This typically generates around 10% annually.
I’m primarily a technology researcher. Therefore, I have a detailed outlook on what I consider the best investments in this field. While tech is high-growth over the long term if I pick successful companies, diversification is critical when constructing a portfolio to mitigate risk.
At the moment, some of my largest investments include Alphabet, Games Workshop, and LVMH. Another I’m eyeing is Intuitive Surgical (NASDAQ:ISRG).
Where robotics meets healthcare
Intuitive Surgical is a very special company, in my opinion. It’s exactly the kind of investment opportunity I typically look out for. I think Buffett might agree that management has carved out a powerful “moat”, which means it’s difficult for competitors to challenge it.
After all, its Da Vinci systems, where surgeons can operate remotely through four robotic arms, are unmatchable, in my opinion. In addition, once these are installed by health centres or hospitals, the high costs of implementation mean competitors are unlikely to be able to take market share. The company has a significant lead here in total installations.
Its technology could potentially implement advanced AI and begin to integrate some elements of autonomous surgery. As it stands, the company hasn’t made any public statements indicating that, however. This opens up room for new tech companies to potentially compete.
Yet for now, I think Intuitive Surgical’s moat is very strong, and I haven’t seen any disruptive new companies trying to challenge it.
I’m aiming for £1m or more
Most of us in the real world have to start small; I know I did. But I’ve developed a long-term plan. A big part of this is investing about 15% of my earnings every month.
As an example, starting with just £500 and adding roughly £200 per month and investing in the stock market could lead to a total portfolio value of over £1.4m in 30 years. It may not, of course and I might lose money as well as make it.
Buffett doesn’t just invest in high-growth companies that have enduring competitive advantages. He also has a value investing strategy. Adding that mindset to my investment plan is crucial, as it means I won’t buy shares when they’re too pricey.
In the case of Intuitive Surgical, the valuation looks a little high to me right now, but not too high to stop me from investing in it soon.
The post Here’s how I’d aim to get rich with Warren Buffett’s strategy, starting with just £500 appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Oliver Rodzianko has positions in Alphabet, Games Workshop Group Plc, and Lvmh Moët Hennessy – Louis Vuitton, Société Européenne. The Motley Fool UK has recommended Alphabet, Games Workshop Group Plc, and Intuitive Surgical. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
