Warren Buffett Teaches How to Allocate US$10,000 Using Business Principles

Warren Buffett, the world’s legendary investor, teaches a philosophy that transforms the way one views investing: buying businesses, not merely shares. This principle requires investors to understand how a company makes money and to assess its durable competitive advantages.

Buffett’s primary principle is to choose companies that are truly understood, avoiding investments based on market trends such as during the dot-com era or crypto assets whose business models are unclear. This philosophy focuses on business quality and reasonable share prices.

For capital of US$10,000, Buffett suggests the following allocation: US$3,500 allocated to a global share ETF to gain diversification from approximately 1,300 companies in developed countries. Next, US$2,000 is invested in shares of quality companies with solid business moats and long-term growth prospects.

Additionally, US$2,000 is allocated to a domestic ETF as a risk-spreading strategy in the local market. The remaining US$2,500 is kept in cash as a reserve fund to capitalise on opportunities when market corrections occur or good share prices decline.

Buffett emphasises the importance of a long-term investment horizon, namely focusing on the quality of business growth over 10 to 20 years. This approach differs from short-term speculation that relies solely on daily share price movements.

Through his investment company, Berkshire Hathaway, Buffett has implemented a value investing strategy for more than six decades. This method prioritises fundamental analysis, the intrinsic value of companies, and high discipline to avoid being influenced by momentary market fluctuations.

Amidst modern investment trends that are fast and speculative, Buffett’s conservative approach has proven capable of consistently delivering above-average market returns. This philosophy helps investors avoid the trap of speculation and build wealth sustainably.