5 minute read

Warren Buffett is one of the biggest names in finance, and for good reason. With a $140 billion personal fortune built through decades of disciplined investing, his track record speaks volumes. And luckily for us, Buffett has always been candid about his approach.

How does Buffett approach investing?

Warren Buffett is a value investor: he looks for businesses trading below their intrinsic worth. That value lies in company assets, future earnings potential, and a leadership team that’s competent and trustworthy. When he finds these companies, he buys a significant stake and holds on to it. And he's particularly critical of trading – buying shares simply because you think their price will rise in the short term isn't investing, he says, it's speculation.

Once invested, Buffett advocates holding for the long term, regardless of market fluctuations. In fact, when prices drop, it’s all you can eat for Buffett, often pouring more into his favourite companies.

He judges companies on several key factors: consistent performance with high profit margins and minimal debt is a good sign. He also seeks out businesses with defensible competitive advantages – what he calls "moats" – since these help companies thrive decades into the future. With Buffett’s nigh-on permanent investing horizon, that longevity matters

What’s the takeaway here?

Buffett consistently reminds investors that they are business owners, not just stockholders. That’s important enough to reiterate: when you buy shares, you are becoming a partial owner of a real business with employees, products, and customers.

While Buffett's philosophy isn't particularly complicated, analysing individual companies like he does requires significant time and expertise. That's why he advocates a simpler approach for most investors: low-cost index funds. These give you ownership in hundreds of companies at once, providing exposure to overall market growth – a principle that our General Investing portfolios are built on.

📰 In Other News: Investor appetite for chips is growing stronger

While semiconductors have been a hot topic throughout the last year, recent news has sparked something of a chipmaker rally. Japan's Nikkei stock index jumped 2% in a single session on Tuesday, while Korea’s KOSPI index surged by around 5% over the past week  – driven largely by chip-related stocks.

Among the headlines, Microsoft just announced an US$80 billion investment in data centers for 2025 – an ongoing trend of big spending for Big Tech. Meanwhile, chip-manufacturing giant Foxconn reported record revenues in its fourth quarter, with December sales alone up 42% year-over-year.

The tech world now turns its attention to Las Vegas, where Nvidia CEO Jensen Huang is headlining the Consumer Electronics Show, the world’s biggest tech exhibition. Huang will be unveiling the firm's new chips and any breakthroughs in "physical AI" – robots that can interact with the real world.

If you're looking to invest in tech without putting all your eggs in one semiconducting basket, you might want to consider our Thematic Portfolios (which we’ve recently refreshed with new ETFs). Our Technology Enablers portfolio in particular gives you exposure across the AI value chain.

🎓 Simply Finance: Economic moat

Just as a moat protects a castle from attackers, an economic moat refers to a company's long-term competitive advantage. These barriers help defend a company's market position and profits against its competitors. For example, Coca-Cola's brand recognition makes it difficult for new drinks to compete, while patents protect a firm’s products and innovations from being copied.

What’s FAT got to do with 2025?

2024 was a groundbreaking year for major asset classes like equities, gold, and cryptocurrencies, with multiple all-time highs achieved throughout the year. But now, it’s time to look ahead.

Join Stephanie and Michele on 21 January for 2025 Macro Outlook: "FAT" is the new normal. Discover how Fiscal expansion, AI, and Trump’s agenda could shape your investments in 2025.

Get the insights you need to stay ahead—and don’t forget the live Q&A with our experts.

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