With no savings at 36, I’d use the Warren Buffett approach to build wealth

I am 36 now and have been investing in stocks for some time. But I think even if I start today with no savings, I can still build wealth through buying shares. The key for me is to follow Warren Buffett’s philosophy on investing.

Do I listen to Buffett

Mega-successful investors usually buy US stocks, which since 1965 have returned an average of about 10%. Investments since then, however, have returned an average of about 20%. Sounds good enough already, but it gets better.

That’s what I mean. If I can return 10% on a £10,000 investment over a 30-year period, the compound interest will build up to £174,494. Not bad.

But if I take that £10,0000 and give it a 20% return over 30 years, it snowballs to a gargantuan £2,373,763. That is more than 13 times the amount of money.

The answer to such stocks is how he became the richest man in the world, and that is why his advice is so important to anyone who wants to build wealth by holding shares in companies.

How he invests

“The money is made by investing in good companies for a long time.

It’s a quote from Buffett that explains his philosophy. Basically, invest in some companies that are very good and last for a long time. He did this himself, with 75% of his company Berkshire Hathaway‘s portfolio only consists of five companies.

One of them is a beverage manufacturer Coca Cola, a stock that has returned 10,749% over the past 40 years. That comes back 107 times! This really shows the power of investing in the right companies. Anyone who held £10,000 in Coca-Cola alongside Warren Buffett in 1983 would have seen the stock mushroom to £1,070,000.

As for me, I will look to build a portfolio with the company FTSE 100. British companies are cheap by historical standards right now, so it’s a great time to get in.

How stocks can build wealth

Retirement age when I’m older looks like 68, so I’ll be 32. And the average return on the FTSE 100 is 8% back to the start.

Let’s say I can save £300 a month. If I can get an average return of 8%, that will have accumulated a total of £500,639 by the time I’m 68. That’s a good figure, but what is ‘wealth’? I’m not sure, but it could give me financial security or an additional source of income.

But what if I could take Buffett’s advice and get a higher return? At 12% a month, £300 per month will balloon to £1,156,579 when I’m 68. That’s a very good amount of money and could give me enough extra income in retirement, or even pave the way for earlier retirement.

Inflation means the number will be lower in the future. And I can end up with lower or even negative returns.

Still, as a framework to use stocks to get real wealth even if I have no savings at 36 or any other age? I really like Buffett’s advice.