I'm sure most Australians dream of a golden retirement.
Well, the good news is that anybody can have one if they plan for it. Even if you're now in your 40s and have no savings.
That's because history has shown that it is possible to build a golden nest egg even when starting at zero at this point in your life.
One way to achieve this is by following in the footsteps of Warren Buffett, who has generated the majority of his enormous wealth long after he turned 40.
A key to this could be following Warren Buffett's "golden rule."
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Warren Buffett's golden rule
The Oracle of Omaha's golden rule actually comprises two rules. He explained:
Rule No. 1: Never lose money.
Rule No. 2: Never forget Rule No. 1.
While this might sound very simple, these words are actually a lot more insightful that you may first think.
The Berkshire Hathaway (NYSE: BRK.B) leader is essentially telling investors to be careful when choosing investments and not try to get rich quickly by putting their money into speculative ASX shares.
This is very important because it can be very tempting to sink money into a hot tip you heard from a friend or a hyped-up ASX share that is promising the world from its amazing yet unproven technology.
More often than not, investors will lose all or most of their money. This then makes building wealth harder.
For example, imagine you invest $10,000 but lose 80%. You'd have $2,000 left. You will now need to generate a 400% return to get back square.
Whereas if you'd not gambled with your investments, earning a 400% return on your original investment would mean it grows to $40,000.
That's a $30,000 difference because you broke Warren Buffett's golden rule.
Which type of ASX shares should you buy?
Warren Buffett has delivered staggering returns over multiple decades by focusing on high-quality companies with fair valuations and sustainable competitive advantages.
Doing this, investors have a great chance of at least matching the market return, which has historically been approximately 10% per annum.
Now, if you're in your 40s and can afford to put $1,000 into ASX shares each month, your portfolio would grow to become worth approximately $725,000 in 20 years if you average a total return of 10% per annum.
And if you can keep going for another five years, you would see your portfolio increase to be worth over $1.2 million, all else equal.
Overall, I believe this demonstrates why even starting at zero in your 40s, it isn't too late to build your own golden retirement.
