Warren Buffett's investing prowess has catapulted him to sit among the world's richest people. Interestingly, however, the billionaire's strategy for culminating wealth isn't beyond the abilities of the layperson. Indeed, if I was 30 years of age with nearly no savings in the bank, I'd use Buffett's methods to try to amass my own fortune by investing in ASX shares.
Buffett's net worth sits at around US$109.5 billion at the time of writing, according to Forbes, making him the world's fifth richest person. It's no secret the 'Oracle of Omaha' made the majority of his fortune through value investing.
Here's how I would look to build wealth through investing in ASX value shares if I were 30 with little to no savings.
Using Buffett's method to try to get rich
Value investing is simple in concept, but it can be tricky to get right in the real world. The idea behind the strategy is to find shares that are trading below their intrinsic value.
By doing so, an investor can jump on board a quality company and wait for the market to realise the true value of their investment's assets. The key point here is 'quality'. Here's a widely cited Buffett quote:
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
But what makes a company wonderful? The investing guru is said to look for companies with strong balance sheets and competitive edges. Such traits can often help a company battle through tough times and retain their hard-built business over the years to come.
Identifying quality stocks trading for cheap
Of course, deciding to follow Buffett's investing mantra is easier said than done. Finding undervalued, quality companies can take time and patience.
Some of the simpler ways to assess a company's true value include considering its price-to-earnings (P/E ratio), price-to-book (P/B) ratio, and debt-to-equity ratio.
Low P/E and P/B ratios might indicate an ASX share is undervalued. Meanwhile, a high debt to equity ratio may mean it's heavily reliant on debt.
I would also consider how a company performs during tough times. As Buffett knows, a market crash could come at any time. Additionally, I would make a point to build a diverse portfolio of value shares, thereby reducing risk.
Next to no savings at 30? Time is on your side
The final factor I would consider when trying to build wealth at 30 with next to no savings is the market's historical upwards trajectory.
The S&P/ASX 200 Index (ASX: XJO) was established in 2000 at 3,133.3 points. Today, it trades at around 7,300 – marking a 130% gain over that time.
While past performance doesn't guarantee future performance, a 30-year-old investor has time on their side. Even if I had no savings at 30, I would prioritise investing a set amount each month to take advantage of compounding.
Over the 10 years to 2021, the ASX 200 grew an average of 6.6% annually. Assuming I invested $500 a month in ASX shares capable of providing similar returns, I could boast a portfolio worth $530,000 in 30 years. That's despite only forking out a total of $180,000. And that's before considering the potential compounding power of reinvesting dividends.
So, if I were 30 with no savings to speak of, I would follow Buffett's advice to build future wealth. Indeed, even the oracle himself is said to have built 99% of his wealth after his 50th birthday.
