Warren Buffett is one of the most respected investors of our times. In fact, given that he bought his first shares when he was 12 years old in 1942, became a millionaire in 1962 and a billionaire over 30 years ago, he’s been respected for at least a generation or two. And his advice for investing over the years is as relevant in 2022 as when first given. So if I was looking to invest £2,000 in the coming weeks, here’s how I’d go about it.
The first point I’d take from Warren Buffett is that the £2,000 is going to be invested for the long term. I’m not looking to buy the stock in January and become a millionaire by December. Buffett spoke of the value of being patient when he said that “someone’s sitting in the shade today because someone planted a tree a long time ago”.
What he means here is that to enjoy the fruits of my investing, I need to let my stocks grow over time. If I’m happy with the research I’ve conducted, then the share price should increase in value in years to come. I shouldn’t be overly concerned if in the short run I don’t see much progress in my portfolio.
If I struggle with this point, then I can always look to add some exposure to dividend stocks. This way, I’ll get the benefit of income paid out usually a couple of times a year. This will show results within my portfolio, even if my capital gains are still waiting to sprout.
Don’t overcomplicate things
One quote that I really like from Warren Buffett is when he said that “there seems to be some perverse human characteristic that likes to make easy things difficult”.
I can apply this to various points in life, but it’s especially relevant when it comes to investing. With my £2,000, I could create very complicated spreadsheets with many stock picks. In reality, I can create a very nicely diversified portfolio with a dozen stocks at most.
I don’t have to make those picks really complicated. I can pick a few of my favorite sectors, and select a couple of stocks from each area. If I can’t find one that I like, then I can sit on my cash for a while until an opportunity presents itself. I don’t need to force things.
Wise words from Warren Buffett
So what have I learnt? Well, I’d take a long-term approach to investing the £2,000 by picking stocks that should have good future value. I’d also try to keep my portfolio simple. This would include not picking too many stocks, and making sure I have a balanced mix of different sectors.
In this way, I can hopefully weather whatever choppy seas (Covid-19, or other issues I don’t yet know about) come my way in 2022 with regards to the stock market.
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Jon Smith and The Motley Fool UK have 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.