Over the past couple of decades, the stock market has been a wealth-building machine.
The S&P 500 (SNPINDEX: ^GSPC) has earned total returns of more than 330% over the past 10 years alone, which would have quadrupled your money in that time
Famed investor Warren Buffett is known for his savvy stock-picking abilities, but his advice for investors looking to replicate his strategy is simpler than you might think. Here’s his No. 1 tip for building life-changing wealth. Buffett’s advice: Don’t just choose stocks In Berkshire Hathaway’s 2021 letter to shareholders, Buffett discussed the investing strategy he and former business partner Charlie Munger shared.
He noted that the stocks with the most earning potential come from healthy companies. “Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves,” he explained. “That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.” This advice is more important than ever, as many stocks have experienced explosive growth over the past few years. Stock price alone doesn’t always tell the full story, and plenty of shaky companies behind fast-growing stocks could crumble under the weight of a recession. If you’re investing in companies with weak fundamentals and the market takes a turn for the worse, there’s a chance those stocks will crash hard and struggle to recover.