Billionaire investor Warren Buffett has been sharing valuable investment advice for decades. His philosophy focuses on buying profitable companies and holding them at the top for the long term.
Buffett's advice can become even more valuable if you're trying to protect your savings as you approach retirement. Here are some highlights from the legendary investor.
Invest in Yourself
You can increase your net worth by investing in the stock market, but one of the most important investments is in yourself. Learning new skills can lead to higher income, allowing you to earn more.
Taking care of your mind and body can make you more energetic and productive at work and help you avoid some of the high costs of healthcare.
Keep it simple
Buffett is not a fan of complexity. He says your investment strategy should be simple. Instead of picking stocks and keeping up with the latest news, Buffett encourages most investors to buy low-cost S&P 500 index funds.
These funds give investors exposure to 500 of the largest U.S. companies. When a stock underperforms (or no longer meets the index criteria), it is removed from the index in favor of another company. As you age, it becomes harder to recover from significant market losses, making index funds even more valuable to older investors looking for diversification.
Keep Calm
One of Warren Buffett's most famous quotes is: “Be fearful when others are greedy, and greedy when others are fearful.” Investors who panic during market declines often end up selling their stocks to patient investors who are enjoying the ride to the top.
Every investor can benefit from ignoring the news cycle and focusing on the long term. But it can be even more important for people approaching retirement, as they won't have as much time for their portfolios to recover from downturns.
Use the moat principle
Buffett looks for companies that have what he calls “moats“: competitive advantages that make it difficult for other companies to catch up. You can also build a moat around your personal finances to make retirement more feasible when the time comes.
High-interest debt can be a moat killer for people headed toward retirement. Paying off that debt, cutting expenses, and investing more of your money will build your financial moat.
Become a Long-Term Strategist
One of the key factors to Buffett's success is his long-term thinking. Buffett focuses on where stock prices will be in a few years, rather than where they are today. He has implemented strong financial habits and ignored the short-term noise that has caused other investors to panic.
Patience, simplicity, and discipline define Buffett's investment approach.