I’d target just a handful of shares to aim for a million!

Many people love the idea of ​​becoming a stock market millionaire. Some try to achieve without thinking about the best investment strategy for them, or how they can make it a reality. If I want to aim for millions, I will learn from people who have done it (in some cases, many times).

For example, billionaire investor Warren Buffett. Buffett released his latest newsletter over the weekend and it contains key insights that I think could help me become a stock market millionaire!

Beyond 80/20

Many people are familiar with the 80/20 rule.

Actually, few things lead to many results. For example, in a certain cricket team there may be only a few players who are responsible for most of the wickets.

The same applies, in broad terms, to stock market investments. Buying decent Shares can bring decent returns (although not guaranteed). But if I want the kind of extraordinary returns that can help me reach my millions, simply buying decent stocks may not provide the performance I need to be successful.

However, I want to find the type of stock that can move the needle. These can be few and far between.

Buffett’s outperformance

How many stocks should I buy, while maintaining a diversified portfolio to manage risk?

Here’s what Buffett had to say about the topic in this year’s letter to his company’s shareholders Berkshire Hathaway. He started with an amazing voice It’s my fault: “In Berkshire’s 58 years of management, most of my capital allocation decisions have been no better than that.“.

But if Buffett has made many investments even he describes it as “so-so“, how did he turn Berkshire into a company worth more than $600bn?

Buffett attributes his success to two things. One is to take a long-term approach to investing. Another he describes as “the product of about twelve really good decisions – that will be about one every five years“.

In other words, Buffett has made billions and billions of dollars by buying into just a few small companies.

How I want to million

I want to do the same.

Like Buffett, I can focus on finding truly outstanding businesses selling at attractive prices. I hope to get a higher return on my investment than spreading my money through dozens of different companies and praying that one of them will be the next one. Amazon or Spirax-Sarco.

But what will help me reach my goals when I aim for millions?

It depends not only on the rate of return but also on how much I invest. As a long-term investor, I like to think in years or even decades. But if I really strive for a million, the more money I can invest, the faster I can reach my goal.

Although my goal is more modest, I think that building a portfolio of just a few amazing companies will help me better than filling my ISA with dozens and dozens of stocks to try to cover the waterfront!