How to Invest Like Warren Buffett in 2025

Last year was a great one for stocks, with the S&P 500 confirming its presence in a bull market and soaring 23% for a second consecutive year of gains. Now, heading into 2025, that momentum could continue thanks to ongoing excitement about artificial intelligence (AI) stocks and the benefits of a lower interest rate environment.

But the market is also known to surprise us occasionally, so it's impossible to guarantee exactly what path it will take, even if things look bright at the moment.

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So, what's an investor to do? Consider a few tips from one of the most famous investors on the planet, one who has beaten the S&P 500 over time and generated billions of dollars in returns.

I'm talking about Warren Buffett. As chairman, he's helped Berkshire Hathaway deliver a compounded annual gain of more than 19% over 58 years -- compared to the S&P 500's 10% increase. Buffett knows how to invest successfully over the long term, making him a terrific model to follow. So, let's consider how to invest like the Oracle of Omaha, as he's often called, in 2025.

Image source: The Motley Fool.

1. "Be greedy only when others are fearful"

In his 1986 letter to shareholders, Warren Buffett said he and his team aim to be "fearful when others are greedy and to be greedy only when others are fearful." So, Buffett generally doesn't follow what everyone else in the market is doing. If the trend is to buy or sell a certain company, Buffett probably won't be along for the ride.

Instead, the top investor looks at the long-term potential of each stock in his portfolio and considers other elements, such as dividends paid annually. For example, today, the average analyst estimate calls for American Express stock to change little over the coming 12 months. In his most recent shareholder letter, Buffett spoke favorably about American Express' dividend growth, along with that of another of his favorite companies, Coca-Cola, and said he intended to hold on to these stocks.

"We will most certainly leave our holdings untouched throughout the year. Could I create a better worldwide business than these two enjoy?" And then Buffett, referring to how his sister would answer the question, wrote, "No way."

This means that if you're confident about a particular stock's long-term outlook or appreciate the dividend growth, think twice before selling just because others predict a near-term decline or favor other stocks and industries. Like Buffett, you could win over the long term by sticking with what you believe in.

2. Acknowledge your mistakes and learn from them

Though Buffett has scored many wins over time, the famous investor is quick to admit he's made some mistakes, too. In fact, one he's spoken about is his decision not to buy Amazon earlier in the company's growth story.

"I had no idea that it had this potential," he said in a 2018 CNBC interview. "I blew it."

But Berkshire Hathaway went on to buy Amazon stock in 2019 -- a purchase made by one of Buffett's investment managers -- and has held on ever since. And it's been a winning move, as Amazon stock has advanced more than 130% over the past five years.

How can you apply this to your investing in 2025? Don't be afraid to buy a stock that's already gained in recent years as long as it still offers solid long-term growth prospects. A good example is artificial intelligence (AI) chip giant Nvidia. The stock has soared over the past two years, but the company's earnings are solid, it holds a leadership position in the AI market, and it's set to benefit from the new wave of AI growth.

So, in 2025, consider every stock's long-term potential and scoop up those that offer the possibility of growth well into the future.

3. Bet on the general strength of American companies over time

Buffett has always been a great believer in the power of American companies. In his 2013 shareholder letter, the billionaire wrote, "In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts)."

How can you best invest in the strength of American companies? Buffett offers clear advice here, recommending investment in an S&P 500 index fund. These funds mimic the composition of the S&P 500 and, therefore, track its performance. And Buffett puts his money where his mouth is: He owns shares of both the SPDR S&P 500 ETF Trust and the Vanguard S&P 500 ETF.

It's true that through stock picking, you may beat the index over time, like Buffett, so continue to select stocks that suit your investment strategy. At the same time, it's a wise move to also invest in an index fund to provide you exposure to a wide range of top companies and industries. This offers instant diversification and the likelihood of a win over the long haul.

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American Express is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon and American Express. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.