Warren Buffett is rightfully considered to be one of the most successful investors of all time. Over many decades, he has generated market-beating returns for his Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B) business.
The good news is that Buffett is not a quantitative trader using fancy algorithms. His success has been achieved through a relatively simple investment strategy that can be replicated by almost any investor.
This means that by following his approach it could be possible to build a surprisingly large investment portfolio with ASX shares even from having no savings at age 40.
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Warren Buffett's investment approach
Warren Buffett has traditionally sought to buy high-quality companies when they trade at fair prices. It is important to highlight that he's not necessarily looking to buy the cheapest shares that are available at any given time. The Oracle of Omaha simply wants quality at a good price.
This is summarised perfectly in his famous quote:
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
But with thousands of ASX shares to choose from, how do we find wonderful companies? Well, Warren Buffett aims to identify companies that have strong business models, sustainable competitive advantages, and talented management teams. Looking for ASX shares with these qualities would be a good start.
The good news for investors right now is that some temporary headwinds are weighing on a number of high-quality businesses, potentially creating a buying opportunity. CSL Limited (ASX: CSL) and Treasury Wine Estates Ltd (ASX: TWE) spring immediately to mind.
How would this make you rich?
If you're 40 and don't have any savings, don't worry. If you can afford to put $12,000 into ASX shares each year, then you have the potential to build a sizeable investment portfolio.
When Warren Buffett invests, he thinks long-term. This is because the longer you invest, the more you benefit from compounding. And with a net worth of US$118 billion, boy has he benefited!
But so can you. For example, if you can invest $12,000 into ASX shares each year and achieve an average return of 10% per annum, which is just a touch higher than the 30-year average of 9.6%, then you will see your portfolio grow as follows:
- 10 years = ~$210,000
- 20 years = ~$750,000
- 25 years = ~$1.3 million
Overall, by investing using a similar approach to that followed by Warren Buffett, investors could put themselves in a position to grow their wealth materially even when starting at zero at 40.
