Here's How to Invest in ETFs With Warren Buffett's Strategies

Warren Buffett, the legendary investor, will step down as CEO of the $1.16 trillion Berkshire Hathaway (BRK.B) at the end of 2025 after leading it for 60 years. After decades of steering one of the most iconic and successful conglomerates in financial history, Buffett's departure will mark not just a shift in leadership but will call for some reflection on the part of investors.

Despite management changes, the timeless principles of Buffett’s investing philosophy will remain as relevant as ever.

What Investors Can Learn From Buffett’s Investing Technique?

Buy Businesses, Not Stocks

Buffett always emphasized understanding the business model, competitive advantage (moat), and management quality over market hype. Companies like Coca-Cola KO, Apple AAPL, and American Express AXP are staples in Berkshire’s portfolio for this reason. As such, investors should bet on ETFs that offer exposure to companies with predictable earnings, strong brands and long-term growth potential. Schwab U.S. Broad Market ETF SCHB could be a solid pick. It holds well-diversified 2,415 of the largest publicly traded U.S. companies. SCHB has a Zacks ETF Rank #3 (Hold) (read: Build Wealth With Buy and Hold Strategy: ETFs for Long-term Investors).

Look for Economic Moats

A moat is a durable competitive advantage, like strong brand value, pricing power, or network effects. Buffett loves Coca-Cola and Apple because of their consumer loyalty and market dominance. Investors looking for a wide moat could invest in the $12 billion-AUM VanEck Morningstar Wide Moat ETF MOAT. It offers exposure to attractively priced 53 companies with sustainable competitive advantages according to Morningstar's equity research team.  

Buy Quality at a Fair Price

Buffett evolved from a pure value investor to buying great businesses even at moderate premiums, provided their return potential justifies it. So, investors should not chase just “cheap” stocks but consider quality and growth. iShares MSCI USA Quality Factor ETF QUAL fits well into this strategy. It provides exposure to large and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage). QUAL has a Zacks ETF Rank #3 (read: 5 Quality ETFs Topping S&P 500 Past Month).

Be Fearful When Others Are Greedy

Buffett is a contrarian. During downturns, he buys, and during bubbles, he holds cash or sells. Per the strategy, investors should keep cash ready for bear markets and downturns. During market turmoil, like what we saw in early April, SPDR Bloomberg 1-3 Month T-Bill ETF BIL and JPMorgan Ultra-Short Income ETF JPST could allow you to quickly take advantage of investment opportunities when they arise. This is because these funds invest in short-term bonds and help investors keep aside money for a couple of weeks to a few months with almost no risk. SPDR Bloomberg 1-3 Month T-Bill ETF has a Zacks ETF Rank #3.

Think Long Term

Buffett once said his favorite holding period is “forever.” He avoids speculation and focuses on compounding wealth slowly over decades. Schwab U.S. Dividend Equity ETF SCHD fits better in this strategy. This ETF offers exposure to 103 companies with a strong record of profitability and sustainability of dividends. It has a Zacks ETF Rank # 2 (Buy).
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research