No matter how much experience you have, investing in the stock market can be a daunting process. Nowadays, there are ample media outlets promoting ‘get-rich-quick’ schemes such as day trading. At times, it can all seem too much. That’s when I turn to my favourite investor, Warren Buffett.
Amid all the noise, Buffett calmly goes about his business. During his time, he’s amassed a net worth of over £120bn.
Of course, I won’t be dealing in figures the same size as Buffett. However, that’s not to say I can’t use him as a source of inspiration to help me navigate the market.
Here are two vital tips I used from the ‘Oracle of Omaha’ to kickstart my investment journey.
Invest in what you know
The first tip is to know what you’re investing in. By that, I mean to understand the company you’re buying. There are plenty of companies and industries that investors can decide to research and pile their money into. However, when investors focus on companies that they have a basic understanding of, this makes the process less nuanced.
Warren Buffett likes to buy businesses that are simple and easily defensible. With my investing, I try to do the same.
Be patient
So, I’ve decided that I’m going to focus my attention on companies I know and understand. But what should I do about market volatility? According to Buffett, nothing.
Volatility in the market is inevitable. However, that shouldn’t act as a deterrent. Instead, as a Fool (capital F!), I focus on the bigger picture.
When I buy a stock, I intend to hold it for a minimum of five years. As Buffett said: “I buy on the assumption that they could close the market tomorrow and not reopen it for five years”. Ideally, I’d hold for longer.
Putting it into action
So, applying the above, what sort of stock would I buy? Well, what better than one Buffett owns? Apple (NASDAQ: AAPL) stock makes up nearly half of his portfolio. It’s easy to see why.
Firstly, the firm has a major grip on the market. Over 20% of the world’s population uses an Apple product. It’s also incredibly efficient at keeping its customers in its ecosystem. Being an Apple product user myself, it’s easy to see the value that the business provides.
On top of that, long-term shareholders of the company have experienced major gains in previous years. Of course, by no means is past performance an indication of potential future gains. However, in the last five years, despite volatility, the Apple share price has climbed 319.4%.
Inflation has seen the business suffer in the last year or so. As the cost-of-living crisis ensues, there is always the risk that consumers look to hold back spending money on new goods. While it has a solid market share, it’s also worth considering the threat posed by competitors.
However, I’m bullish on the long-term future of Apple. As highlighted by the recently released Apple Vision Pro, I’m confident it can continue to be a market innovator going forward.
It was one of the first stocks I owned. I plan to keep adding to my position in the years to come.
The post I’d use these Warren Buffett methods to gain confidence when investing appeared first on The Motley Fool UK.
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Charlie Keough has positions in Apple. The Motley Fool UK has recommended Apple. 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.
