Motley Fool: Invest with Warren Buffett

Want to invest like Warren Buffett? Consider buying Berkshire Hathaway (NYSE: BRK.B) stock. Led by Buffett, co-chairman Charlie Munger and skilled managers, Berkshire Hathaway has outperformed the market for decades, and owning the stock gives you a piece of the famously successful conglomerate.

Berkshire Hathaway’s fully owned subsidiaries include massive railway, insurance and energy businesses, along with big names such as Fruit of the Loom, Duracell, See’s Candies and Dairy Queen. It also has a powerful stock portfolio, recently valued near $300 billion, including 20% of American Express and more than 5.5% of Apple, among many other holdings.

In recent years, Buffett has spent tens of billions of dollars buying back (and essentially retiring) many shares of Berkshire’s stock. That reduction in the share count leaves each remaining share with a bigger stake in the company, benefiting shareholders. Meanwhile, Berkshire still had $105.4 billion in cash at the end of the second quarter, which it can use to invest in beaten-down companies or to make new acquisitions.

Berkshire Hathaway is a well-managed company with a strong foundation, and the stock stands out as a relatively low-risk investment capable of delivering returns that can meet, if not beat, the overall market over the coming years. Note, too, that Buffett is 92, and there’s a succession plan in place. (The Motley Fool owns shares of Berkshire Hathaway and has recommended Berkshire Hathaway stock and options.)

Ask the Fool

Q. Is it too late to refinance my mortgage? – S.C., Columbus, Ohio

A. It may be, as interest rates are higher than they’ve been in a long while. Refinancing often makes sense when prevailing rates are at least a percentage point lower than your current loan’s rate. It also depends on how long you plan to stay in the home – it will take several years’ worth of savings on interest to cover the refinancing’s closing costs.

Learn more at Fool.com/mortgages and Bankrate.com, and see if refinancing makes sense for you.

Q. I’m 26 and am wondering – should I invest some money in CDs? – D.B., Cadillac, Michigan

A. Certificates of deposit, or CDs, are solid choices for your short-term investments, and they’re more attractive than they have been in recent years, thanks to increasing interest rates.

But even young people should consider saving and investing for retirement, and unless interest rates are quite high, CDs won’t serve you well for that. Money that you won’t need for at least five years (or, to be more conservative, 10 years), is likely to grow more briskly in stocks, which over many years have outperformed bonds, cash and even gold.

Consider that many three- and five-year CDs recently yielded around 3.5%. You can top that with some dividend-paying stocks. Walgreens Boots Alliance recently yielded 5.75%, for example, while Intel yielded 5.6%, 3M 5.2% and Citigroup 4.7%. Those payouts aren’t guaranteed, but many companies have been paying them – and increasing them – regularly, over decades.

Also, the stock prices of healthy and growing companies should increase over time. CDs are good for short-term money, for emergency funds and for when you need safety more than growth.

My smartest investment

My smartest investment was buying shares of Nvidia. It’s the first stock I bought that was a winner, and it really got me started in my investing adventure. – M.A., online

The Fool responds: You did well, indeed! Shares of semiconductor specialist Nvidia were recently up nearly 17,000% over the past 20 years – which comes out to an annual average of more than 29%. That’s enough to turn a $10,000 investment into $1.7 million. Even more impressive, those numbers are after the stock’s 65% drop from its high point over the past year. Its recent market value was near $300 billion.

You were fortunate to have such a winner early in your investing life, because that definitely helps new investors see what’s possible and can help them stick with it over time.

With any great stock, though, it’s important to remember these things: The stock will not rise in a straight line; there will be pops and drops. And the company may not remain a strong performer with a rosy future – so you should keep up with its progress and developments, in case things change.

Nvidia’s shares are down this year partly because of the tech market slump, but also because of the cryptocurrency downturn, as cryptominers use the company’s graphics processing units, or GPUs. Many still see its future as promising, though, as it introduces new offerings and continues to lead in gaming chips.