Warren Buffett is one of the most successful investors of all time. Therefore, following his advice could be a sound move when seeking to build a retirement portfolio.
Even if you have no retirement savings at age 40, it is not too late to build a nest egg that can provide a generous passive income in older age.
By starting to invest in cheap, high-quality shares today, you could capitalise on the long-term growth potential offered by the stock market.
Warren Buffett’s focus on undervalued stocks
Warren Buffett has sought to buy the best companies he can find when they are trading at the lowest prices. This enables him to benefit from their likely recovery as the economic outlook gradually improves. It also means that his money is invested in those businesses that may have the highest chance of surviving difficult trading conditions.
This could be especially relevant at the present time. The world economy faces its most difficult period since the global financial crisis. As such, only those businesses with wide economic moats and solid balance sheets may survive what could be a prolonged period of weaker sales and profit growth.
Warren Buffett’s aim to buy such companies at low prices has contributed to his outperformance of the wider stock market. Through purchasing high-quality businesses at low prices, you can obtain a wide margin of safety that leads to impressive capital growth as investor sentiment and company profitability improves.
Return prospects after the stock market crash
Clearly, some investors may be unsure about following Warren Buffett’s lead at the present time. The stock market crash has highlighted the volatility that can be present in equity markets. It could even return later this year, with risks such as the US election and the coronavirus pandemic being present.
However, the market crash could present a rare buying opportunity for investors. Many high-quality businesses are trading at low prices that factor in the risks faced by the world economy. This provides a wide range of choice through which to build a diverse portfolio of companies. Over time, they could recover to produce a surprisingly large nest egg from which to draw a passive income in older age.
Starting to invest at age 40
Following Warren Buffett’s tips from a standing start at age 40 could lead to a worthwhile retirement nest egg. After all, you are likely to have around 20-30 years left until you retire. This provides your portfolio with a substantial amount of time to grow.
Therefore, it is not too late to start investing in shares, with the market crash providing the perfect opportunity to buy undervalued stocks. Over time, they could make a positive impact on your financial future, and help to bring your retirement date a step closer.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
- Stock market crash: why the best high-dividend-yield shares can help you retire early – November 25, 2020 2:00pm
- 3 reasons why I’d invest money in blue-chip shares at today’s prices – November 24, 2020 11:15am
- Why long-term investors shouldn’t fear a second market crash – November 23, 2020 1:00pm