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You are never old to start investing . But can you be too young? Warren Buffett was itching to invest as a schoolboy and made his first purchase in 1942.
Nowadays in the UK, a Junior ISA could be one way for the next Warren Buffett to own shares at such a young age.
But I think investors of all ages can learn a lot from how the multibillionaire started out in the stock market under his own steam.
Buffett’s first move
Warren Buffett bought three shares in what is now CITGO for $38 apiece, so the total was $114.
In reality of course, the total cost was likely greater. Even today, one of the first lessons any investors learn is how stockbroking commissions and other charges can add up.
That was much worse back in the 1940s before online investing, but today it is still worth comparing share-dealing accounts and Stocks and Shares ISAs when hunting for a cost-effective way to invest.
Given the ravages of inflation, $114 back in 1942 is worth roughly $2,383 today. Not bad at all for an 11-year-old schoolboy who had saved up money from a paper round for the purchase.
In fact, I think that is also instructive. Buffett was marshalling his resources and generating cash under his own steam to invest.
Follow good investment principles from day one
At today’s exchange rate (with a far weaker pound than in 1942), $2,383 would be worth around £1,754.
That is plenty of money to avoid one mistake Warren Buffett made with his first investment – a lack of diversification.
Putting all your money into one share without spreading your risk is a schoolboy error. Warren Buffett was indeed a schoolboy when he did it – but the rest of us have no excuse.
Buying great businesses at attractive prices
Early in his career, Buffett was a value investor who was willing to buy into dying businesses as long as the share price looked cheap enough.
He later changed his focus to invest in what he saw as great companies at attractive prices.
Using some Buffett principles, one share I think investors should consider is Judges Scientific (LSE: JDG).
The company has grown through acquisition and owns a range of small and medium-sized instrument manufacturers serving specialist users like scientific labs. In that market, accuracy matters, so customers are willing to pay for quality.
But one challenge lately has been lacklustre demand in the US. I continue to see that and an uneven post-pandemic demand recovery in China as risks.
That helps explain why the share has lost 40% of its value over the past year. Now selling for 31 times earnings, this still looks more expensive than I am normally comfortable paying as an investor.
But I think Judges’ unique assets, pricing power and cash generative business model could help earnings grow handily in coming years.
From a long-term perspective, like the one Warren Buffett takes, I see it as a share to consider.
