Warren Buffett's long-term approach to investing money in shares has allowed him to benefit from the stock market's growth over many decades.
The good news is that even if you have no savings at 45, it isn't too late to follow Buffett's lead and start building your wealth in time for retirement.
At present, Australians can receive Government Age Pension benefits when they reach 66.5 years.
Though, I suspect in a couple more decades, there's a reasonable chance that this will have increased to 70 years.
Based on this, if you're starting to build wealth at 45, you have 25 years to do it before retirement.
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Building wealth the Warren Buffett way
Warren Buffett has built his wealth over many decades by buying shares in high-quality companies with strong business models, competitive advantages, and attractive valuations.
Pleasingly, this is a strategy that anyone can follow. In fact, there are even exchange-traded funds (ETFs), such as VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT), that have been designed to mimic this investment style.
You only need to look at Warren Buffett's record or the performance of this ETF to see that the strategy works. In respect to the latter, over the last 10 years, the fund that the MOAT ETF tracks has generated an impressive 19.23% per annum total return for investors.
And while past performance is no guarantee of future returns, the market has historically provided investors with a 10% per annum return over the long term. So, let's base our calculation on that for the time being.
If you follow Buffett's advice of buying quality shares at attractive prices, generating a 10% annual return, you could turn a reasonably modest amount of capital into a surprisingly large portfolio over a 25-year period.
For example, an investment of $10,000 per year for 25 years would turn into $1.2 million.
And if you're able to dig a little deeper and invest $15,000 per year, your portfolio would be worth approximately $1.8 million after two and a half decades.
Beating the market
Finally, if you do a Buffett and beat the market with your returns, then your investment would grow even larger.
A return of 19.2% per annum, like the MOAT ETF has achieved over the last decade, would turn a $10,000 annual investment into a staggering $5.75 million after 25 years. Though, it is worth remembering that returns of this level are incredibly hard (near impossible) to achieve over both short and long periods.
All in all, this demonstrates that it is never too late to build your wealth through investing.
