£10,000 to invest? I would buy stocks like Warren Buffett to aim for the million!
Image source: The Motley Fool
Thinking like Warren Buffett and investing “on the downside” led to the emergence of a new class of investors in the 2010s. These people are known as Stocks and Shares ISA millionaires.
When stock markets crashed around the 2008 financial crisis, they didn’t follow the herd and take shelter. They took a long-term view and stuffed their ISA stocks with beaten-up bargains.
This meant that when the eventual rally in the stock market arrived, they saw the value of their assets skyrocket and reaped the rewards. It’s a strategy that allowed Warren Buffett to create a personal fortune north of $100 billion.
The Rise of the Millionaires
A sharp drop in purchases means the number of Stocks and Shares ISA millionaires has skyrocketed again in 2021 as well.
Hargreaves Lansdown says the number of ISA millionaires on its books rose 69% year-over-year in 2021, to 973. The stock market rebound has helped them generate excellent returns while stocks that they bought during the Covid-19 downturn jumped in value.
Long term investment
But these stock market millionaires do more than just hunt for value stocks when markets fall. They also follow other key Warren Buffett investment principles, says Hargreaves Lansdown.
For example, ISA millionaires regularly buy stocks and plan to build long-term wealth. Hargreaves Lansdown says these successful investors invested in stocks »every year for decades”. Indeed, the average age of these individuals is 72 years, specifies the financial firm.
Using a similar buy-and-hold strategy helped Buffett, 91, earn billions with his Berkshire Hathaway investment company since the 1960s.
Buy blue chips
Buying reliable large-cap companies is another way for ISA millionaires to emulate Warren Buffett and get hugely rich. According to Hargreaves Lansdown, “the top 10 stocks held by this group are dominated by blue chip companies, including those that traditionally pay strong dividends”.
Buffett’s portfolio has also long included some of the world’s largest blue chip companies. Currently, some of the US stocks held by Berkshire Hathaway include Coca Cola, Apple, Chevronand American Express.
I invest like Buffett!
There is no guarantee that an individual will earn mountains of money investing in stocks. But the success of these ISA millionaires shows that it can be done. And following the successful plan of legendary investors like Warren Buffett can help investors achieve their goals.
Let’s say I have a lump sum of £10,000 to invest right now and I buy an additional £400 worth of shares each month. Based on a 10% rate of return, after 30 years I would have earned £1,006,211. I would have joined the millionaires club.
And this 10% rate of return is not a pipe dream either. It is the average annual rate of return of stock markets over the past 50 years. It’s a number that I think could, with regular investments and a Buffett-style investing strategy, help me build spectacular long-term wealth.