No savings? I’m using this Warren Buffett tactic as I aim to get rich

Building wealth isn’t necessarily about what you start with. Take billionaire investor Warren Buffett as an example. He first bought stocks using money he got in schoolboy paper rounds. Today, he is among the richest people on the planet.

There is one tactic that Buffett uses when investing that I think helps explain a lot of his success. Fortunately, I was able to apply the same tactics to build my own stock portfolio, even with limited funds.

Driving long-term outperformance

Many investors do well in the stock market. But few do it well, like Buffett. Annual value addition of the company Berkshire Hathaway between 1965 and 2022 it was 19.8%. To achieve annual profit for several years is one thing (and it has been impressive), but to manage for more than half a century is a remarkable achievement.

Something that separates the good from the great, in investing as elsewhere in life, is that exceptional performance is often driven by excellent results.

Many investors manage some brilliant success. However, over time, many of the stocks in the portfolio do poorly, or worse. That brings down the average performance, as the money that can be invested in the strongest player is tied up in shares that end up doing far less well.

Fat pitches

That’s why Buffett waits for what he sees as an excellent investment idea. Using a baseball analogy, he referred to these opportunities as ‘pitch fat’.

He explained: “All day you wait for the pitch you like; then, when the fielders are asleep, you step up and hit.”

In fact, Buffett sometimes waits for years. He followed IBM for almost half a century before investing in (although it still hasn’t been one of the best moves of late).

Will this approach work for him? It certainly seems. Writing in this year’s annual letter to Berkshire shareholders, he said: “The grass withers as the flowers bloom. Over time, it only takes a few winners to do wonders.”

Not only that, but he attributes Berkshire’s success to a long-term investment mindset and “about twelve really good decisions.” In Buffett’s case at Berkshire, that means about one every five years.

Invest like the best

Can I use the same tactics? Absolutely! I may not have a pot of cash or research resources. But no matter what type of shares I buy, or how much I invest, I can use Buffett-style selectiveness where I focus on finding only brilliant investment ideas.

That takes time, patience, and effort. But it doesn’t always require a lot of money. That’s why this tactic that works for Buffett also works for even a small private investor like me.