Warren Buffett is preparing to step away from his famous Berkshire Hathaway brand and there are lots of lessons that investors can learn even once he departs.
Buffett, known as the “Oracle of Omaha” and considered one of the most successful investors of all time, announced earlier this month that he is stepping down as chief executive of Berkshire Hathaway.
Buffett grew the per share value of the company by an astonishing 5,502,284% between 1964 and 2024 – a compounded gain of 19.9% per year, according to Berkshire Hathaway’s latest annual report.
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In comparison, the S&P 500 gained 39,054%, a compounded annual gain of 10.4%.
Buffett beat the S&P 500 140 times over.
The 94-year-old is handing over management of one of the largest and most successful investment firms of all time to Greg Abel from next year but will remain as chairman.
He is known for his investing style and for finding undervalued companies with a strong foundation. As a result, some of his biggest investments include Apple, Coca-Cola and American Express.
His strategy has helped him become one of the richest men in the world, with a net worth of more than $160 billion. His value investing approach has been adopted by many well-known fund managers including Terry Smith and Nick Train and here is how you could also build a Buffett-style portfolio.
We share some of his top advice that everyone can use when investing.
5 tips to take from Buffett
1. Time in the market
The idea of time in the market rather than trying to time it isn’t an idea unique to Buffett but it is a mantra he has kept to.
One of his famous quotes is “our favourite holding period is forever.”
Laith Khalaf, head of investment analysis at AJ Bell, said: “Buffett says you should only be prepared to buy a stock if you would be happy to hold it if the market closed down for ten years. It’s totally uncontroversial that investors should be long term in their approach, and the idea that when you buy stocks or funds you should do so with the intention of never letting them go is a good one, not least because short termism can lead to investment losses and excessive trading fees.”
Anyone can invest like Buffett, says Faisal Sheikh, managing director at Monmouth Capital, as long as you have the following: time, cash and a modest lifestyle.
He said: “If you want to achieve spectacular returns, time is the single biggest factor. The effect of reinvesting growth and income over years and decades - called compounding - is a mathematical wonder.
“But it's not easy. To stay invested and keep investing year in, year out, you need to have a good cash buffer, so you don't have to dip into your investments.”
It helps to live modestly as well, he says, adding: “Buffett famously lived in the same house, drove the same car and had the same cheap McDonald's breakfast every day for a very long time.”
2. Invest in what you know
Buffett famously said “you don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies in your circle of competence.”
This means investing in what you understand and ultimately avoiding fads.
Khalaf says this did mean Buffett snubbed technology stocks in the 1990s as he felt he had no insight into which ones had a durable competitive advantage, even though he shared the view that the world would be transformed by their products and services.
This contributed to Berkshire Hathaway underperforming the S&P 500 by 41% in 1999. But the company subsequently outperformed by 35.7% in 2000, 18.4% in 2001 and 18.3% in 2002.
Khalaf adds: “Staying inside your circle of competence is a really important piece of advice which can prevent you losing money and feeling a nasty sense of buyer’s remorse to boot. That’s not to say your circle of competence is static. It can expand as you build your investing knowledge and experience.”
Daniel Wiltshire, independent financial adviser at Wiltshire Wealth, explains that Buffett's investment philosophy is based on humility.
He said: “He would only invest in businesses and industries he felt he truly understood. This philosophy meant he sometimes missed out on emerging trends but also protected him from overhyped fads that didn’t deliver long-term value. Once invested, he typically held positions for the long term, focusing on companies with clear, proven business models and durable competitive advantages.”
3. Focus on quality
Rather than chasing the next big thing, Buffett’s philosophy is built on backing established brands that have a dominant market position. His portfolio includes market leaders such as Visa, Coca-Cola and American Express.
Joshua Gerstler, chartered financial planner at The Orchard Practice, said: “Buffett looks for companies with strong brands, reliable profits, and a clear competitive advantage. For individual investors, this means focusing on businesses you believe will still be thriving decades from now.”
4. The diversification question
The conventional investment wisdom is to not put all your eggs in one basket.
But Khalaf highlights that Buffett has around 70% of his listed portfolio in just five stocks, making it highly concentrated.
He adds: “This is supplemented by a long list of subsidiary businesses owned by Berkshire which increases the diversification of the holding company as a whole. Buffett’s position on diversification stands in contrast to conventional investment advice, and the idea that diversification is the only free lunch in investing, a saying often attributed to the Nobel prize-winning economist Harry Markowitz.
“There are instances where Buffett’s position on diversification carries a great deal of weight.
“Fund managers who spread their eggs across most of the market but charge active fees for doing so are almost certain to deliver serial underperformance for investors.”
Khalaf suggests there is a certain level of diversification that a stock investor should aim for, adding: “Typically that would require a minimum or around 25 stocks in a portfolio, which is already a sizeable number to keep on top of.”
Gerstler added: “While Buffett is known for his concentrated bets, it’s important to remember that putting too much of your money into just a few companies can be risky. For most investors, a well-diversified portfolio, ideally with a global mix of shares, can help reduce the impact if one or two investments don’t go as planned.”
5. Buy an index tracker
Rather than aiming to emulate Buffett, another strategy is to follow his own advice that “both large and small investors should stick with low cost index funds.”
Buffett suggests that by periodically investing in an index fund: ”the know-nothing investor can actually outperform most investment professionals. Paradoxically, when “dumb” money acknowledges its limitations, it ceases to be dumb.”
Khalaf adds that there is a way to bridge the gap, he said: “By starting out with a core of tracker funds, and adding active funds and individual stocks as satellite holdings, investors can grow their circle of competence while also insulating their wealth from mistakes. Gradually they can grow the active part of their portfolio, if they wish.
“Building up this knowledge and experience will probably come in very handy as you approach retirement, when investors will probably want to take a more active hand, dialling down risk and switching towards an income-producing portfolio. That will probably necessitate some investment selection decisions with a large pot of money, so it’s not a great idea to get stuck in without a warm up.”
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