What would Warren Buffett do?

Simply mentioning his name evokes the idea of success in the financial world. Countless pages have been written in an attempt to unravel his methods, and generations of investors have tried to follow in his footsteps. Yet Warren Buffett remains a singular figure in the history of the markets.

On 3 May, the ‘Oracle of Omaha’ announced that he will step down as the head of Berkshire Hathaway after 60 years at the helm. This milestone offers a fitting moment to reflect on what truly made Warren Buffett a legend in the world of finance – and to consider which of his timeless lessons can still guide investors today, regardless of their experience or approach.

A financial prodigy

Let’s take a step back and briefly revisit Buffett’s personal story. It’s March 1942 in Omaha, Nebraska – a quieter corner of America, far from the towering skyscrapers of New York and the sun-soaked boulevards of Los Angeles. The country has just entered World War II, following the Japanese attack on Pearl Harbor the previous December. The nation is fully mobilised for war, and a sense of uncertainty hangs in the air.

Roaming the streets of Omaha is a boy not yet twelve, already lost in thought. He comes from a respectable family – his father is soon to be elected to Congress – and excels at school, though his mind is often elsewhere. He’s captivated by numbers, drawn to the world of finance, stocks, and business. And in the midst of a global war, he has just taken his first bold step into the markets by purchasing his very first shares.

His talent is undeniable – that first investment marks the beginning of a career that continues to this day and has cemented his status as a true legend in finance. By the age of 13, he’s delivering newspapers and earning an impressive $175 a month. A year later, he’s saved $1,200 and uses it to buy a plot of land, which he promptly rents to a farmer.

Still in his teens, Buffett is already eager to dedicate himself fully to business. But at his father’s insistence, he continues his education. At 17, he enrols in economics at the University of Pennsylvania, before completing his studies at Columbia University, where he graduates in 1951.

By the time he finishes his studies, he has already saved $10,000 – a remarkable sum for the time – determined to continue his early journey as an investor. After college, he gains experience working at various financial institutions, steadily building a small fortune to support his ambitions.

At 26, he takes a decisive step he launches his first investment fund, raising $105,000 from friends and family. The venture thrives. The post-war American economy is booming, and Buffett seizes the momentum. By 1965, that once-curious boy from Omaha is in a position to acquire a struggling local textile company.

That company is Berkshire Hathaway. Within just two decades, Buffett transforms it into one of the most influential financial holding companies in the world. Since 1965, its value has surged by an astonishing 4,000,000% – yes, four million percent – compared to around 31,000% for the S&P 500 over the same period. The mind behind this extraordinary growth? The same boy who once roamed the streets of Omaha at age 12, clutching his first stock certificate. His name is Warren Buffett.

The Oracle of Omaha’s investment principles

So what has been Buffett’s secret over all these decades? His entire philosophy can be summed up in one phrase “Only buy something that you’d be perfectly happy to hold if the market shuts down for ten years.”

Patience and long-term vision are the core ingredients of Buffett’s ‘recipe’, which has delivered annualised returns of nearly 20% from 1965 to 2023 – consistently beating the S&P 500’s 10% average.

And yet, Buffett’s success doesn’t rely on secret algorithms or privileged access to information. His approach is deceptively simple identify high-quality companies, buy them at a fair price, and – most importantly – hold them for the long term.

When once asked by a journalist about the best time to sell a stock, he famously replied “The best time to sell is never.” His true advantage, he explained, lies not in spotting the next Amazon or Apple, but in having the patience to remain invested as strong businesses grow steadily over time.

Looking back on more than six decades of investing, Buffett’s philosophy can be distilled into five principles.

1. Only invest in what you truly understand

Buffett calls this the “circle of competence” it doesn’t matter how big that circle is – what matters is knowing its boundaries and staying within them. For instance, during the dot-com bubble of the late ’90s, while everyone was frantically buying anything with “.com” in the name, Buffett kept away. He felt he didn’t understand that sector well enough – and saved billions in the process. Critics at the time called him outdated or out of touch. His response was “Risk comes from not knowing what you’re doing.”

2. Look for companies with a ‘moat’

Buffett looks for businesses with a lasting competitive advantage – something that truly protects them from rivals. Take Coca-Cola, which he’s held for over 30 years its global brand recognition is its moat. Apple? Its integrated ecosystem of devices and services. American Express? Its wide network of merchants and long-standing partnerships.

3. Invest in companies with strong leadership

Buffett says “When a company with a good reputation meets a manager with a bad one, it’s the manager’s reputation that prevails.” One reason Apple remains one of his biggest investments is the strength of its leadership, from Steve Jobs to Tim Cook.

4. Buy with a margin of safety

Being a great company isn’t enough – it also has to be bought at the right price. As Buffett famously put it “Price is what you pay. Value is what you get.” Even the most outstanding business can turn into a poor investment if you pay too much for it.

5. Be patient

Perhaps the most important lesson of all comes from one of Buffett’s most quoted insights “The stock market is a device for transferring money from the impatient to the patient.” Long-term thinking is key to investment success.

Why long-term thinking works

Buffett believes there are four key reasons long-term investing works.

• Historical evidence – Despite wars, crises, and recessions, the stock market has always trended upward in the long run. Since 1926, there hasn’t been a single 20-year period in which the US stock market delivered negative returns.
• Compound interest – What Einstein called the “eighth wonder of the world” reinvested earnings generate additional gains, creating exponential growth. Buffett himself said “My wealth comes from a combination of living in America, some lucky genes, and compound interest.” In fact, he earned 99% of his wealth after age 50.
• Lower costs and taxes – Frequent trading leads to higher fees and taxes. Long-term investing helps keep both to a minimum.
• Avoiding short-term noise – Buffett never tries to time the market. “I’ve seen many people fail trying to predict market moves,” he once said. He focuses on the companies, not the day-to-day market fluctuations.

Mistakes Buffett avoids

It’s just as important to know what Buffett doesn’t do.

• He doesn’t follow the crowd – His motto “Be fearful when others are greedy, and greedy when others are fearful.” In 2008, while markets crashed, he invested billions in solid businesses at a discount.
• He ignores daily news – He once joked he’d be a better investor if he only saw stock prices once a year.
• He avoids using financial leverage – Buffett doesn’t borrow heavily to invest, seeing debt as a risk and a barrier to patience.
• He doesn’t chase hype or bubbles – In 2008, he wrote to shareholders warning that a pessimistic attitude is sometimes necessary when markets go too far.

Buffett’s lessons for all investors

Even if most of us don’t have portfolios the size of Buffett’s, his principles still apply universally.

1. Think long-term

To increase your chances of earning returns from your investments, you should think in terms of decades – not weeks or months. Investing should be seen as a long-term activity, not something that ends in a short time. As Buffett once said “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

2. Invest calmly and regularly

We can also learn to invest regularly, regardless of market conditions. Buffett never focused on predicting market swings or sudden rallies. Instead, he invested steadily over time – and often increased his buying when prices fell.

3. Use the right tools

Not everyone can analyse balance sheets like Buffett – and that’s perfectly fine. Even he once said that, after his death, 90% of the money left to his wife should be invested in a low-cost ETF.

4. Diversify your portfolio

Diversification is another core principle of investing. According to Buffett, investors who aren’t financial experts should prioritise diversification to avoid the risks that come with relying too heavily on individual stocks.

5. Keep learning

Buffett has long believed that “an investment in knowledge pays the best interest.” Even today, well into his 90s, he continues to spend the majority of his day reading and learning.

We’ve seen how Buffett’s core principles — patience, long-term thinking, and discipline — have stood the test of time. These same values guide our advisors every day, as they translate them into practical, accessible investment solutions.

Take our ETF portfolios, for example they’re built to provide broad exposure to high-quality companies around the world, while keeping management costs low and focusing on long-term results.