Warren Buffett: A 4-Step Guide to Building a Million-Dollar Portfolio

Are you looking to build a million-dollar portfolio? Here’s a four-step guide to portfolio building the Warren Buffett way. 

| More on:
Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks

Image source: Getty Images.

The 90-year-old billionaire Warren Buffett is regarded as the Oracle of Omaha of the investing world, as he made his wealth through investing. In his +70 years of investing experience, he has seen many stock market crashes, technology revolutions, and business and economic trends. It’s not like he didn’t lose money, but he came out of his mistakes profitably with the help of a well-balanced diversified portfolio.

Buffett’s billion-dollar portfolio

He knows that not every investment he makes will give him profits. He learns from his mistakes and takes calculated risks. Before you invest your hard-earned money in a stock, read and study about it, its business, its management, and its market. And only invest in those businesses that you understand and trust.

Firstly, set aside some money for investment and how much you can allocate to risky investments. Once you determine your risk appetite, it is time to build a portfolio. You can adopt a four-step top-down approach to portfolio building.


The first thing you look at is which sector you are comfortable investing in. Buffett understands the money supply chain and consumer goods but doesn’t feel comfortable with technology and commodities. Hence, most of Berkshire Hathaway’s investments are in consumer goods, banks, financial institutions, and fintech companies. Another billionaire investor, Prem Watsa, is heavily invested in tech and energy.

The 2030 decade will see the rise of 5G, clean energy, digitization, and electric vehicles. These are some sectors you might want to consider when building your portfolio. But don’t overdiversify. Even billionaire investors don’t overdiversify, as it can dilute your gains.

Size and value 

Once you settle on a sector, consider the type of companies you want to invest in. Do you want to invest in market leaders, fast-growing companies, or value stocks trading at a discount? Warren Buffett has a mix of all.

  • His largest holdings are in market leaders of their respective sectors like Apple and Coca-Cola in consumer goods.
  • He has also made small investments in initial public offerings like that of Snowflake.
  • He seeks value stocks and therefore made a big acquisition of Dominion Energy’s natural gas pipeline business when the stock was down because of the pandemic.

Domestic/foreign investments 

While Buffett loves America, he has investments in foreign markets. As the world comes closer, companies are growing globally and looking to become a global brand. Every country has a unique market trend. Investing in domestic and foreign companies or global companies can reduce your country-specific risk. Berkshire Hathaway has made investments in many Canadian companies like Suncor Energy and Barrick Gold and Brazil-based fintech company StoneCo.

The Canada Revenue Agency allows you to buy U.S. stocks trading on the NYSE and the NASDAQ through your Tax-Free Savings Account (TFSA).


Once you know the sector, the company size, and the stock exchange, you can decide on how to get exposure to their growth. Buffett prefers buying equity and preferred shares of a company. You can buy a stock of the company you are bullish on and the ETF of a sector you are bullish on.

Managing a million-dollar portfolio 

Creating a portfolio is just one part of it. Managing it is a different ball game. Not all your stocks may perform the way you thought. When you make a mistake, admit it and exit the stock to contain losses. Buffett did not hesitate to exit the entire airline sector by selling US$6 billion worth of stake in the top four U.S. airlines in April 2020.

If you are bullish on the entire tech sector, you can buy iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT). The XIT ETF buys the top 19 Canadian tech stocks and holds them. You buy the ETF for less than $50/unit and get indirect exposure to the price fluctuation of these tech stocks. The ETF derives more than 50% of its value from Shopify and Constellation Software, as they have the highest market capitalization. It can give you high exposure to large-cap tech stocks and medium exposure to value and mid-cap tech stocks.

Build and manage your portfolio wisely.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), Constellation Software, Shopify, Shopify, and Snowflake Inc. The Motley Fool owns shares of Stoneco LTD. The Motley Fool recommends Dominion Energy, Inc and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2021 $225 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares).

More on Tech Stocks

sad concerned deep in thought
Tech Stocks

Tech Stocks Crumble: Is it Time to Buy?

Shopify is coming down from its pandemic highs as its business falters, but BlackBerry's business is just gaining steam.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Tech Stocks

This 1 High-Growth Stock Just Got Irresistible

Despite a challenging macro environment, Lightspeed continues to post strong growth, which could help this high-growth stock stage a sharp…

Read more »

exchange-traded funds
Tech Stocks

Buy the Dip: 3 ETFs That Have Taken a Beating in 2022

Three prominent TSX ETFs trades at bargain prices in 2022 because of their significant exposure to the slumping technology sector.

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

Lightspeed Stock Gains 10% Post Q4 Results

Lightspeed stock gained on the back of stellar results in Q4 of fiscal 2022. Should LSPD stock be part of…

Read more »

Man data analyze
Tech Stocks

Tech Selloff: 3 Growth Stocks Available at Pre-COVID-19 Prices

Tech stocks such as Shopify and Zoom are trading at a much lower multiple due to the ongoing selloff in…

Read more »

TSX Today
Tech Stocks

TSX Today: What to Watch for in Stocks on Friday, May 20

The ongoing strength in the commodity market could help TSX Composite to continue outperforming its U.S. peers in the near…

Read more »

Question marks in a pile
Tech Stocks

Should You Finally Buy BlackBerry (TSX:BB)?

Is it time to finally buy BlackBerry?

Read more »

grow dividends
Tech Stocks

3 Top TSX Growth Stocks to Buy for Less Than $10

These high-growth TSX stocks are trading less than $10 and have strong potential to beat the broader markets in the…

Read more »