I Asked ChatGPT How To Invest Like Warren Buffett: Here’s What It Said
Written by
John Schmoll
Edited by
Jenna Klaverweiden
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Warren Buffett is renowned as one of the world’s most famous investors. For years, fans have flocked to the Berkshire Hathaway annual meeting in Omaha, Nebraska, to glean investing insights from the guru.
It’s easy to think that because you may not have billions to invest like Buffett, it’s impossible to follow his investing philosophy. Fortunately, that’s not the case. GOBankingRates asked ChatGPT how you can invest like Buffett, even without his vast resources.
Here’s how the generative artificial intelligence (AI) tool directed people to invest like Buffett.
Think Long Term
There’s day trading, and there’s Buffett’s investment philosophy. The “Oracle of Omaha” famously quips that his holding period is forever. “He looks for companies he believes will remain strong and profitable decades into the future, not just in the next quarter,” the chatbot said.
The forever mindset is akin to buy-and-hold investing. While arguably boring, it’s an effective way to reduce costs and embrace compound interest, according to Fidelity. Buy-and-hold investing isn’t sexy, but it can be an effective way to remove emotions and let your investments grow.
Buy Businesses, Not Stocks
Buffett often looks for businesses with a strong management structure when he’s considering an investment. He wants a company that’s well run and embracing competitive advantages. “Warren Buffett views each stock purchase as buying part of a real business, not just a ticker symbol on a screen,” ChatGPT said.
You can follow a like-minded strategy by researching businesses that you may envision yourself being a part of. “Buffett encourages investors to ask themselves, ‘If I could buy the entire company at this price, would I truly want to own it?'” the chatbot said. No, you may not be able to purchase the whole company like Buffett, but you can own a piece and build wealth.
Be Patient and Disciplined
Patience is vital when investing. It’s easy to let emotion drive decision-making, potentially causing you to miss opportunities. Buffett is notoriously patient, often waiting for prospects to open up. His wealth affords him that benefit.
Investors can follow a similar mindset and patiently wait for the right play. A good way to do this is to hold excess funds in a high-yield savings account specifically to jump on a ripe opportunity. “As he famously put it, ‘The stock market is a device for transferring money from the impatient to the patient,'” ChatGPT said.
Diversify, but Not Too Much
Diversification is a key tenet of investing. Through wise diversification, investors can protect themselves against loss, according to Vanguard. Think of it as having focus in your investing. “Buffett believes in focus, preferring to hold a smaller number of businesses that he understands deeply rather than spreading money too thin,” the chatbot said.
Individual investors can achieve this by investing in exchange-traded funds (ETFs) or mutual funds. Owning shares of several strong companies can be another good way to diversify a portfolio. Just make sure you don’t already own the company in an ETF or mutual fund.
Use Simplicity to Your Advantage
Simplicity can be hugely beneficial with investing. There’s little need to overcomplicate things. Buffett is a big proponent of investing in an S&P 500 index fund, as it provides instant diversification and is often low cost. It also breeds simplicity. “In fact, he has stated in his will that the majority of his wife’s inheritance should be placed in an S&P 500 index fund,” the AI explained.
Investors can do the same thing with an online brokerage account. Many also allow for automatic transfers into your account to purchase shares at regular intervals.
Investing doesn’t have to be difficult. By following Buffett’s philosophy, even on a reduced level, you can create wealth and achieve long-term financial goals.
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