As I write, Warren Buffett’s net worth is thought to be just in excess of $140bn. So it may come as no surprise to hear that he’s known as the ‘Oracle of Omaha’, with investors around the world eager to hear and interpret his every word. And despite his unimaginable wealth, his teachings are incredibly valuable for novice investors.
No savings? No worries
Many Britons have no savings at 30. But while it may be common, it doesn’t mean it’s happy situation to be in. Conventional wisdom tells us we should have enough savings for at least six months. Beyond building a small reserve, many of us want to build wealth, and investing regularly and over a sustained period of time, is one of the best and most popular ways of doing it.
Thankfully, Britons start can investing with very little money at all. Investors could look to put aside as little as £50 a month from our salaries in order to get started. Or if an investing were willing to make cutbacks in other parts of our lives — such as a daily coffee out — that £50 figure could be expanded upon.
Here’s a graph showing how £200 monthly contributions compound over 30 years at annual rates of 5%, 10%, and 15%. The differences in growth become more pronounced over time due to the power of compounding, with the higher rate reaching £1.4m.
Buffett’s golden rule
So, what does this have to do with Warren Buffett? Well, it’s simply about how we invest. Many novice investors lose money chasing big returns. And that’s why Buffett’s first rule of investing is “don’t lose money”. The thing is, if an investors makes a poor investment decision and the value of that asset — stock — goes down 50%, the investment has to go 100% up to get back to where it started.
It’s certainly easier said than done — don’t lose money. However, it underscores the need to make researched investment decisions and not simply follow our gut or even the crowd. This could mean using quantitative models to build a rationale for our investments.
A strong investment to consider?
One stock potentially worthy of consideration is Blue Bird Corporation (NASDAQ:BLBD). The American company is a leading designer and manufacturer of school buses in North America. And it has benefitted from the electrification agenda, supported by federal subsidies.
Some recent pullback in the share price may be associated with President-elect Donald Trump’s likely repeal of the clean energy/ EV provisions in the Inflation Reduction Act. This does create some risks for shareholders.
However, the company boasts a strong backlog of orders, a robust balance sheet, and impressive profitability grades. Moreover, the valuation data is highly attractive. The stock is trading at 9.7 times forward earnings and has a price-to-earnings-to-growth (PEG) ratio of 0.77. It’s also a brand that customers know, having been founded in 1927. That counts for a lot sometimes.
Those considering it should bear in mind that buying US stocks will mean that their investments are also subject to exchange rate fluctuations. Moreover, they’ll need to apply for a W8-BEN which will allow them to buy and trade US-listed stocks. This needs updating periodically but it’s still simple and I don’t think it should put anyone off US investing.
The post No savings at 30? Use Warren Buffett’s golden rule to build wealth through investing appeared first on The Motley Fool UK.
But here’s another bargain investment that looks absurdly dirt-cheap:
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
More reading
Forget gym goals, here’s how to build wealth without maxing out ISA contributions in 2025
Here’s my stock market resolution for 2025
After treading water for 5 years, this FTSE 100 stock is set for a crucial 2025
FTSE shares in 2025: an opportunity to get rich?
2025: a great opportunity for investors to get rich and work towards a second income?
James Fox has position in Blue Bird. The Motley Fool UK has no position in any of the shares mentioned. 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.
