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I would try to turn £20,000 into £90,000+ using 3 simple Warren Buffett moves

I would try to turn £20,000 into £90,000+ using 3 simple Warren Buffett moves

I would try to turn £20,000 into £90,000+ using 3 simple Warren Buffett moves

Image source: The Motley Fool

Billionaire investor Warren Buffett has done exceptionally well by taking some fairly simple, easy-to-understand steps.

For example, his greatest asset is: Apple (NASDAQ: AAPL), is now worth tens of billions of pounds more than he paid for it. But he didn’t start buying Apple shares in the 1970s or 1980s. He made the move in the past decade, when Apple’s success had been clearly visible for years.

Using three simple Buffett investing approaches, I think I can realistically turn £20,000 into a portfolio worth £90,000.

Here’s how.

1. Buy brilliant opportunities, not just good opportunities

Warren Buffett said that he owes much of his track record to one good decision once every five years.

He doesn’t trade all the time. In fact, he’s said that if someone isn’t going to consider holding a stock for 10 years, they shouldn’t even consider it for 10 minutes. His approach is to buy fewer stocks that he thinks can do brilliantly than a broader selection that he hopes will do very well.

Apple is proof of this, with a 16% increase in the past year alone.

If you own a few shares that grow in value by 16% each year, it will take 11 years for a £20,000 portfolio to become worth more than £90,000. In contrast, it will take longer to own a broader selection of shares with a lower growth rate.

2. Let the head rule the heart

But how does Warren Buffett do that in practice?

He does not Love Apple is known for not wanting to use smartphones for years.

Buffett sometimes uses emotional language when talking about his investments, but in reality he is very rational. Much of his research involves going through publicly available information.

Like Buffett, I can judge Apple’s popularity for myself. I also see elements of its business model that make it potentially attractive as an investment. It has a strong brand, a loyal customer base, a large target market, and benefits from an ecosystem of products and services. Looking at its financial reports, I see that it earned $97 billion last year.

Still, that was down from a year earlier and I see risks for the tech giant, including a weak economy that erodes consumer spending power.

Right now I’m not buying Apple stock, not because I don’t like the company, but because the stock price seems high to me. When Warren Buffett started buying, the valuation seemed more attractive.

3. Taking the long-term approach

Buffett bought his Apple shares and held on to most of them, receiving regular dividends in the meantime.

Warren Buffett is a long-term investor. By doing so, he can reap the rewards of buying brilliant companies for less than they are ultimately worth.

If I were to adopt a similar long-term buy and hold approach, I think I could turn £20,000 into £90,000.