I’d invest £20 a week the Warren Buffett way as I aim to build wealth

When it comes to building wealth over a lifetime, few do it like Warren Buffett. Self-made millionaires have prospered because of their approach to identifying good investments that they can buy and hold for the long term.

Buffett is transparent about much of his investment decision-making process. That means people like me can learn from them and choose to apply some of the lessons to my own stock buying decisions.

Focus on wealth creation

Can one really aim to build wealth by investing a modest amount like £20 per week? I think the answer is yes.

Buffett began as a child. As a schoolboy, he invested his savings in three shares of one company. It is clear that over time he has a much larger amount at his disposal, but I think the principle stands. Start small to build wealth over time by saving regularly and making smart investment decisions.

I think it is critical to bear in mind along the way the goal of building wealth. That can eliminate options that seem profitable but also risky. As Buffett says about investing:Rule number one: never lose money. Rule number two: never forget rule number one.”

Take a long-term approach

Many of the businesses in Buffett’s portfolio could easily have existed a century ago — and many already do. From railways to banks and soft drinks like Coca Cola to the producer of baked beans Kraft HeinzMany of Buffett’s choices have stood the test of time.

I think many of them could come here again in another century.

Buffett tries not to invest in companies just because they have a good past. Indeed, some of the biggest mistakes he himself admits to have been made, like when he invested in a shoe and clothing manufacturing business whose best days were behind him.

They look for companies with business models that they think can do well in the future. Many of these companies have done well in the past and may continue to do so, due to their competitive advantage in the market with their steady customer appeal. When investing, like Buffett, I always focus on the long-term prospects of a business before considering whether to buy a stock.

Keep it simple

Companies like Coca-Cola illustrate another aspect of how Buffett invests. They tend to keep it simple.

That means they don’t invest in any industry they don’t understand. They don’t buy into a company if the financial statements aren’t clear enough for them to understand. They stay in some areas of the business where they have developed deep expertise and often hold shares for years, or even decades.

They also reduce the risk of one bad investment that will wipe out a portfolio with a wide variety of holdings.

It can be easy to think that successful investing must be a complex endeavor, or that more people will do it. In fact, Buffett has shown that he likes to keep things simple.