Why following these 3 Warren Buffett investment ideas could make me rich

Every year, the famous investor Warren Buffett writes a letter to shareholders as part of his annual report Berkshire Hathaway. In it, he reveals some of his favorite investment ideas for that particular period, along with lessons learned. Since Buffett has made a total profit from 1964-2022 of 3,787,964%, surely this idea could make me rich in decades!

The secret sauce

Buffett demonstrates the power of dividends by referencing several long-term investments that generate substantial income. In 1994 he ended up buying 400 million shares in Coca Cola. As a result, the following year he made a profit of $75m from the stock.

If we fast forward to 2022, this figure rises to $704m. The growth in dividends per share over time is one part that has helped the numbers rise. But the rise in stock prices also helped increase this. Any way I dissect it, it’s a great way to generate passive income over time.

Buffett has done the same thing American Express, which is a stock that was bought back in 1995. The annual dividend received from this stock increased from $41m to $302m. The lesson? Holding sustainable dividend stocks can increase your income in the future.

Let the winner walk

Despite the success of Coca-Cola and American Express, it is noteworthy that they do not have a ton of stocks in their income portfolio. Rather, Warren Buffett comments that “over time, it takes only a few winners for the work of glory”.

This does not mean that I should only have two stocks in my income portfolio. This is not diversified and could put you at risk of losing all of your dividends if both stocks reduce their payouts. However, the point is that if I have twelve stocks, I only need a couple to do well.

It also speaks to the fact that I want to keep my winners open for years. I always have the urge to sell shares when it has generated me a good level of profit. Human emotions don’t want to see profits turn into losses. But if I can resist the urge, I can enjoy the benefits of owning a good stock for the long term.

Have an open mind

One of the reflections that made me smile was when Buffett talked about how he and his friends hated railroad stocks. But over time, the world changed. He said “We’re slow to see that change, but better late than never.”

This rings true as an investment strategy for me. In order for me to be rich, I cannot allow myself to have a rigid point of view. For example, I once thought Tesla there are overhyped stocks that are ludicrously overvalued. Now, it’s profitable and the stock price makes more sense, so it’s time to change your mind.

By taking into account Buffett’s ideas, I feel that even if I can page a fraction of the return, I can generate some serious profit.