For one thing, don’t hold cash. He calls currency-based investments “among the most dangerous of assets” because inflation erodes currency’s value over time. To stay as wealthy as you are today, you need an investment that generates a return greater than inflation.

The easiest (and perhaps best) option is to own a low-fee index fund, Buffett says. With the chance to benefit from overall growth of the stock market you’ll probably do alright in the long run. 🏦

But Buffett maintains that if you’re smart and have the time to do research, it’s perfectly possible to build a portfolio of stocks yourself. And unlike most financial gurus, his mantra is not diversification.

Here’s his logic: evaluate companies within your circle of competence and find the few (five to ten) you think are best. Then pile significant amounts into each. Putting money into other companies you’re less confident about doesn’t make sense to Buffett.

"I cannot understand why an investor… elects to put money into a business that is his 20th favorite rather than simply adding that money to his top choices—the businesses he understands best and that present the least risk, along with the greatest profit potential."

– Warren Buffett

Concentrated portfolios actually decrease risk, he says, because you think much more carefully about the businesses you invest in and are less likely to make a mistake. And “an investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business” – approach each investment decision as if you’re buying the whole company.

Once you buy in, Buffett advises you hold for the long term, ignoring fluctuations in market price (although it’s all you can eat for Buffett when prices are low, with more poured into his favorite companies). Do that consistently enough and you’ll hopefully see good returns. 📈

Buffett’s philosophy isn’t particularly complicated, and there’s loads to learn from his slightly contrarian approach. Who knows: maybe following his advice will turn you into the next Warren Buffett. ✨