If there's one investor who has mastered the art of building wealth, it is Warren Buffett.
The Berkshire Hathaway (NYSE: BRK.B) leader has been using a simple yet highly effective investment strategy for decades, and it has made him one of the richest people on the planet.
And while most of us won't unfortunately reach Buffett-level riches, I believe we can apply his principles to the ASX share market to grow our wealth and retire early. Here's how I would go about it.
Investing in high-quality businesses
Buffett is famous for saying, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Instead of chasing cheap or speculative stocks, he focuses on fairly priced companies with strong competitive advantages, consistent earnings, and excellent management.
On the Australian share market, these could be businesses with dominant market positions, strong brands, and pricing power. Think of companies like CSL Ltd (ASX: CSL), Goodman Group (ASX: GMG), or Cochlear Ltd (ASX: COH). These companies have proven track records of delivering solid long-term returns.
Playing the long game
Warren Buffett's success is largely due to his patience. The Oracle of Omaha buys great companies and holds onto them for decades, allowing compounding to work its magic. If I were aiming to retire early, I'd take the same approach with ASX shares—reinvesting dividends and letting my investments grow over time.
For example, if you were to invest $1,000 per month into ASX shares and achieved a 10% annual return, your portfolio could grow to over $2 million in 30 years. That is the power of long-term investing and compounding in action.
Ignoring market noise
Buffett doesn't get distracted by short-term market fluctuations, and neither should we. The Australian share market will inevitably go through periods of volatility, but panic selling is one of the biggest mistakes investors can make.
Instead, I would stay focused on the fundamentals of my chosen stocks. As long as the companies I own remain strong and continue growing earnings, I wouldn't be too concerned about short-term market movements.
Aiming for passive income
Buffett loves dividend-paying stocks because they provide reliable income on top of capital gains. Over time, I would look to transition my portfolio towards high-quality ASX dividend shares like Telstra Group Ltd (ASX: TLS) or Wesfarmers Ltd (ASX: WES). With a strong dividend stream, I could create a passive income that helps me retire early.
Overall, by sticking to Warren Buffett's principles—buying great businesses, holding for the long term, ignoring short-term noise, and focusing on passive income—I believe it is possible to get rich and retire early with ASX shares.
