There are few investors out there that can match Warren Buffett's investment performance for Berkshire Hathaway (NYSE: BRK.B).
Since all the way back in the 1960s, the Oracle of Omaha has delivered incredible returns.
For example, his most recent letter to shareholders shows that Buffett has grown Berkshire Hathaway's book value per share by an average of 19.8% per annum since 1965.
Over the same period, the S&P 500 index has delivered an average return of 10.2% per annum including dividends.
Investors may be able to fluke their way to beating the market for a year or two, maybe even five. But to consistently beat the market for almost six decades cannot be attributed to luck. It is down to good investment decisions and a strategy that works.
In light of this, it can literally pay to follow Warren Buffett's advice when it comes to investing in ASX shares.
But how can investors attempt to replicate his success? Let's dig a little deeper.
Image source: The Motley Fool
Follow Buffett's advice with ASX shares
Thankfully for readers, Warren Buffett's approach to investing is not built on high frequency trading, technical analysis, or anything of that nature.
In fact, his investment style is easy for anyone to replicate and can be summed up in one famous quote. Buffett once quipped:
It's far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.
This quote can be broken down into two key pieces of advice.
The first is that it is very important to assess a company's quality when choosing investments. Buffett is known to look for wonderful companies that have sustainable competitive advantages, strong business models, and talented management teams.
The Oracle of Omaha wants to fill his portfolio with wonderful companies instead of "fair companies." The latter are likely to be companies lacking some or even all of these qualities.
The second piece of advice we can take away from this quote is Buffett's focus on a "fair price."
This arguably acknowledges that wonderful companies are seldom cheap. Every so often, you will find a wonderful ASX share that trades cheaply, but you may go grey waiting for enough of them to build out an entire investment portfolio.
Instead, investors may want to just accept a fair price for their ASX shares. After all, wonderful companies have a habit of compounding strongly over the long term. This means that a fair price today, may end up looking like an absolute bargain in 5 years.
Conversely, you may be able to pick up fair companies at cheap prices. But their lack of competitive advantages or strong business models could lead to them underperforming. In addition, they may be cheap for a reason and could be on a downward spiral. And if there's one thing we hate in investing, it's losing money.
Overall, by following Warren Buffett's approach and focusing on wonderful ASX shares at fair prices, it may be possible to outperform the share market and grow your wealth.
