Due to the Reserve Bank's battle with inflation, interest rates have risen strongly over the last 12 months.
This has been great news for users of term deposits, which have gone from offering barely a flicker of interest to something semi-reasonable.
For example, at present, Australia's biggest bank, Commonwealth Bank of Australia (ASX: CBA), is offering 4% per annum on 36-month term deposits.
While this is better than what you would have received 12 months ago, it pales in comparison to the returns that ASX shares have delivered in the past.
Furthermore, with many economists predicting that the next move for interest rates will be lower, this may be as good as it gets for term deposits for the foreseeable future.
In light of this, it could be better to make investments like Warren Buffett instead of sinking your money into a term deposit.
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ASX shares versus term deposits
To demonstrate why ASX shares could be superior to term deposits, let's take a look at what a $100,000 investment could generate from both.
Imagine you were to invest $100,000 into a term deposit that yields 4% per annum. In 20 years, your investment would have grown to almost $220,000 if you reinvested the proceeds each year.
Whereas, if you were able to generate a 10% per annum return from the share market, your $100,000 investment would have become almost $675,000 in two decades.
That's a ~$450,000 difference!
And while there are of course risks to investing in the share market, unlike risk-free term deposits, and past performance is not a guarantee of future returns, the risk/reward on offer is arguably compelling enough to choose ASX shares over term deposits.
How to invest like Warren Buffett
If you want to invest like Warren Buffett, I have some good news for you.
The Oracle of Omaha has achieved market-beating returns for his company Berkshire Hathaway (NYSE: BRK.B) for decades through an investment style that anyone can replicate.
Buffett likes to focus on buying high-quality companies with competitive advantages, strong business models, and fair valuations.
He then holds onto them for the long term, allowing compounding to work its magic and grow his wealth.
If you're not a fan of stock-picking, then you could consider the very popular VanEck Morningstar Wide Moat ETF (ASX: MOAT). It allows investors to buy a collection of Buffett-type stocks through a single investment.
Over the last decade, the index the ETF tracks has generated a return of 16.3% per annum. That would have turned a $100,000 investment into $450,000 in just 10 years.
