If you're in your 40s and have no savings, don't worry.
That's because history shows that it's possible to build a significant nest egg at this stage in your life by following in the footsteps of Warren Buffett.
In fact, the vast majority of Buffett's wealth has been generated since he turned 40 and there's nothing to stop you from doing the same.
Particularly if you follow his "golden rule."
What is Warren Buffett's golden rule?
Talking about the golden rule, the Berkshire Hathaway (NYSE: BRK.B) leader famously quipped:
Rule No. 1: Never lose money.
To highlight just how important this rule is, the legendary investor then adds:
Rule No. 2: Never forget Rule No. 1.
While this golden rule might sound simple enough, there's actually more to it than you think.
Too often you will see investors trying to get rich quickly by putting their money into highly speculative ASX shares. While they might sometimes get lucky and find a winner, more often than not they will end up holding onto a dog stock like Brainchip Holdings Ltd (ASX: BRN).
Although I would never advocate buying a meme stock like Brainchip, which has a long track record of destroying wealth, at least if you're in your 20s, you have time on your side to recover when things inevitably turn sour.
But if you're in your 40s, you can't afford these losses if you want to retire wealthy. Let's demonstrate why.
Why it's important not to lose money
If you were to make a single $20,000 investment into ASX shares when you turn 40 and generate an average annual return of 10% for the next 30 years, you would end up with a portfolio valued at $350,000.
Over the last 12 months, Brainchip shares have unsurprisingly lost approximately 75% of their value. This means that if you had invested $20,000 into its shares, you would now have just $5,000 left.
Imagine that you now start investing in high-quality ASX shares that Warren Buffett would typically buy (i.e. not Brainchip) and earned a 10% annual return for 29 years, your $5,000 portfolio would grow to be worth $79,000.
This means that the $15,000 you lost gambling on a meme stock has ultimately led to you missing out on $271,000 in potential returns. Very costly.
Overall, this shows the importance of investing in quality companies that have sustainable competitive advantages, profitable businesses, and positive outlooks. Resist temptation and grow your wealth slowly like Warren Buffett.
