Article written by Jason Choy, InvestNow Senior Portfolio Manager – 28th May 2025

There are few bigger names in the investing world than Warren Buffett.

Earlier this month, the legendary Berkshire Hathaway CEO announced he was stepping down after 60 years (!!) in the role, at the age of 94.

He has had a remarkable career that’s unlikely to ever be matched. 

It’s a good time to reflect on some of the reasons for his success. Like any good investor, Buffett has relied on a sound strategy, underpinned by fundamental investing principles.

While this isn’t Buffett’s full investment playbook, these selected principles offer actionable insights any investor can apply:

1. Invest in what you understand 

Buffett talks about staying in his “circle of competence“. He avoids investing in businesses or industries he doesn’t fully understand. 

As an example, he avoided jumping on tech stocks during the dot com boom in the 1990s, which protected him against the fallout when the bubble burst.

There is a world of asset classes for investors to choose from – rather than dip into something you’re not fully sure of, it’s better to stick with something you know. 

Or better yet, expand your ‘circle of competence’ by really taking the time to learn about a business or asset class before investing. This helps to minimise mistakes, and allows you to identify your best investment possibilities with good background knowledge and context.

2. Buy great companies at a fair price

Note Buffett doesn’t say “a cheap price” here. A fair price is about investing in a company not because it’s undervalued, but because it has a strong, competitive advantage. 

He referred to it as an “economic moat” – a unique factor that will allow a business to be resilient and maintain its market position for a long time.

For example, Buffett’s $1.3 billion Coca Cola investment in the late 80s may not have stood out as a bargain at the time. But by focusing on the company’s enduring brand value and global growth prospects, today Berkshire Hathaway collects over $700m annually in dividends from Coke – an over 50% return on his original investment each and every year through dividends alone.

3. Be patient

“The stock market is a device to transfer money from the impatient to the patient,” Buffett once said.

Investing is a long game. Rather than looking for hot stocks, or buying and selling according to what’s red or green, taking a long term lens is the time-proven way to investing success.

Another of his famous quotes is to be “fearful when others are greedy, and greedy when others are fearful”. Impulsive decision-making is not the way to win in the long term.

Buffett is reported to be a huge fan of Einstein’s characterisation of compound interest as the “eighth wonder of the world.” In his mind, the goal is to make your money make money. And that takes time.

“It’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick,” he also said, which highlights the importance of starting your investing journey early to maximise the benefits of compounding

Buffett’s legendary patience with his investments – often holding for decades – has seen him become arguably the world’s biggest beneficiary of the magic of compound interest. 

While many would have an eye towards cashing out their investments in their 50s, Buffett was the opposite, choosing to stay invested. This would clearly a wise decision, as he’d go on to generate an astonishing 99.9% of his $150+ billion net wealth after the age of 50. 

4. Minimise investment costs

Following on from the last point, taking a ‘buy and hold’ approach to investing, and sticking with stocks for a long time, allows your investment portfolio to supercharge the compounding magic by avoiding unnecessary transaction costs and taxes. Buffett famously avoided excessive trading for precisely this reason.

Small costs may seem insignificant but, like returns, ongoing costs can compound and add up over time, including to the point where they have a material impact on your take home returns.

Investors should do what they can to reduce costs, and at the very least understand how much they’re paying in fees and tax.

5. Keep it simple

You might assume investing success requires Buffett-level genius. But here’s the paradox: the man often called history’s greatest investor has spent decades telling ordinary investors they don’t need to pick stocks like him to win.

In fact, Buffett proved this dramatically through his famous 2007-2017 wager. He bet $1 million that a simple S&P 500 index fund would outperform handpicked hedge funds – and he won decisively. The index returned 7.1% annually versus the hedge funds’ 2.2%, after fees.

This wasn’t a fluke. As early as 1993, Buffett wrote in a letter to shareholders: “By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals.” His reasoning? Most active managers can’t overcome their fees and behavioural mistakes.

For investors focused on building retirement security rather than replicating Buffett’s billions, his advice remains remarkably simple:

1. 1. Most people will do better with index funds than stock picking
   2. Time in the market matters more than timing the market
   3. Fees are the silent killer of returns

The lesson isn’t that Buffett’s methods don’t work – they clearly do for him. It’s that his most valuable advice might be knowing when not to try being Buffett.

Putting Buffett’s Wisdom into Practice

Warren Buffett’s greatest legacy isn’t just his billions – it’s the timeless principles that made them possible. 

For everyday investors, his success offers something far more valuable than stock tips: a blueprint for building wealth steadily, sensibly, and without unnecessary complexity. We believe this aligns perfectly with InvestNow’s emphasis on starting early, minimising fees, and avoiding the pitfalls of market timing.

At its core, Buffett’s approach is about marrying patience with pragmatism. He didn’t chase hot trends or panic during downturns; he invested in what he understood, held for decades, and let compounding work its quiet magic. This same mindset can guide your own investing journey – no stock-picking genius required.

Start by embracing simplicity. Instead of trying to pick stocks to outsmart the market, focus on consistent, diversified investments into the wider market. 

Next, cultivate discipline. Markets will always fluctuate, but reacting to short-term noise is often a recipe for regret. Instead, investors are often better served sticking to a single strategy throughout the market’s ups and downs, whether that means regular contributions to index funds or a diversified portfolio tailored to your goals.

Finally, remember that investing isn’t a sprint – it’s a marathon. The bulk of Buffett’s wealth came after age 50, a testament to the power of compounding over time. Whether you’re just starting or fine-tuning your strategy, the key is to begin now, stay consistent, and resist the urge to tinker.

Buffett’s methods may be legendary, but their real value lies in their accessibility. You don’t need to replicate his stock picks to succeed; you just need to adopt his long-term mindset. By combining his principles with practical tools – like InvestNow’s 10 Investing Principles – you too can build a strategy that stands the test of time. 

After all, the goal isn’t to become the next Warren Buffett. It’s to create a future where your money works as hard for you as his did for him.

For more information, InvestNow’s 10 Investment Principles (some of which are echoed above) are another resource that can help to guide you.

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