Again in 2009, Berkshire Hathaway Chair Warren Buffett revealed his shareholders’ letter protecting the prior yr. With its monetary disaster and nervous inventory markets, 2008 has some similarities to what we’ve got seen to date in 2025. For now, happily, issues usually are not as bleak within the markets as they have been again then – although, in fact, that may change.

Within the letter, Buffett mentioned that, “in good years and bad, Charlie (Munger) and I simply focus on four goals”.

At the least two of these objectives are price contemplating even for an investor with only a small amount of cash to place within the inventory market, I reckon.

A rocklike monetary place

One was sustaining what Warren Buffett described as “Berkshire’s Gibraltar-like financial position”.

This included a big diploma of extra liquidity, holding short-term monetary obligations modest, and diversifying sources of earnings and money.

In fact these issues are simpler when coping with billions of kilos like Berkshire, not just a few hundred or 1000’s like many small non-public traders. However they’re nonetheless attainable on a small scale – and I believe sensible traders will act like Buffett on this regard.

By the best way, be aware that even in a really compact abstract, Buffett distinguished between earnings and money. They don’t seem to be the identical factor.

Particularly in a disaster, because the outdated saying goes, ”money is king”. It isn’t by chance that Berkshire ended the primary quarter of this yr sitting on an unbelievable $348bn money pile.

Giant sources of aggressive benefit that may get bigger

One other of Warren Buffett’s 4 objectives was “widening the ‘moats’ around our operating businesses that give them durable competitive advantages”.

A moat is a metaphor Buffett typically makes use of for a aggressive benefit. Like a moat round a fort, it helps hold rivals at bay. Not solely does Buffett search for a moat – he says right here that he focuses on making an attempt to widen it.

He’s speaking about companies that Berkshire totally owns. However I believe the identical logic may be utilized to proudly owning shares in an organization. Certainly, Warren Buffett likes to spend money on firms which have large moats and ideally ones that develop as an alternative of shrinking.

What a moat seems like in observe

As an example, think about Berkshire’s longstanding funding in Coca-Cola (NYSE: KO).

It has been an exceptional success each when it comes to share price progress and dividends. The sugary drink maker has grown its dividend per share for 64 years on the trot.

What’s its moat?

For starters, its namesake product has a novel formulation and powerful model. That permits Coca-Cola to cost a premium price.

By providing a variety of soppy drinks, Coca-Cola has a fuller providing than some rivals, like UK smooth drinks makers A G Barr and Nichols. That, together with an intensive international distribution community, could make it extra interesting to stockists.

This enterprise system, like its drinks system, is easy however retains lots of people blissful.

Can it final? Like every sensible investor, Warren Buffett is keenly alert to dangers. I do suppose the unhealthy nature of many Coca-Cola merchandise is a long-term danger to gross sales.

That’s partly offset by the number of drinks it sells, although. Simply as at a fort, a moat doesn’t have to be complicated to be extremely efficient.