How you could retire rich by investing like Warren Buffett with ASX shares

The secret to retiring rich isn't so secret.

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A head shot of legendary investor Warren Buffett speaking into a microphone at an event.

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Over multiple decades, Warren Buffett has achieved stunning returns for Berkshire Hathaway Inc (NYSE: BRK.B).

This makes the Oracle of Omaha a great person to follow when it comes to your own investments.

Particularly given that Buffett doesn't have any complex trading strategies or try to time the market. This means that even a beginner investor could try to replicate his investment style in an effort to retire rich.

Retiring rich the Warren Buffett way

Warren Buffett is known to take a very patient approach to investing. A famous quote of his encapsulates this. He said:

Someone's sitting in the shade today because someone planted a tree a long time ago.

Let's imagine that you were to invest $5,000 into ASX shares today. This is your seed.

Well, thanks to the power of compounding, if you were to continue investing $5,000 each year for a total of 30 years and averaged a total return of 10% per annum, you would grow your investment portfolio to approximately $1 million. This is your tree. A very large tree that is providing you ample shade in retirement.

But which ASX shares should you buy? Let's take a look at what Warren Buffett looks for when he makes his investments.

Buying ASX shares

It can be tempting to try and find ASX shares that are trading at dirt cheap prices.

However, chances are that anything you find at these levels will not be among the best companies out there. After all, the truly great companies rarely trade at such a discount because smart investors realise that snapping them up at fair prices is sufficient.

Buffett spoke about this when he said:

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

What makes a wonderful company? Well, Warren Buffett is known to have a penchant for companies with sustainable competitive advantages or wide moats.

And given his track record of doubling the market return for over 50 years, it is hard to argue against this strategy.

ASX shares that could tick these boxes for Buffett include hearing solutions company Cochlear Limited (ASX: COH), biotech giant CSL Ltd (ASX: CSL), and investment bank Macquarie Group Ltd (ASX: MQG). They could be worth further investigation.

But overall, the secret to retiring rich isn't so secret. It is simply investing in high quality companies at fair prices and letting compounding work its magic over many years.

Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway, CSL, Cochlear, and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Berkshire Hathaway, CSL, and Cochlear. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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