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

online shopping
Tech Stocks

1 Hidden Catalyst That Could Ignite Shopify Stock

Here's why Shopify (TSX:SHOP) ought to remain a top growth stock investors continue to focus on for the long haul.

Read more »

Man considering whether to sell or buy
Tech Stocks

WELL Stock: Buy, Sell, or Hold?

WELL stock has a lot of upside as the company is likely to continue to grow, posting positive earnings in…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Tech Stocks

Finally Going Private: What Should Nuvei Investors Do Now?

Understanding the reasons and factors behind a public company going private can help investors make an educated decision.

Read more »

woman data analyze
Tech Stocks

1 Stock I’d Drop From the “Magnificent 7” and 1 I’d Add

Tesla (NASDAQ:TSLA) stock is part of the Magnificent Seven, but Shopify (TSX:SHOP) is growing faster.

Read more »

close-up photo of investor Warren Buffett
Tech Stocks

3 Stocks Warren Buffett Owns That Should Be on Your List, Too

Investing in quality Warren Buffett stocks such as Mastercard can help you generate outsized gains in the upcoming decade.

Read more »

Man data analyze
Tech Stocks

Missed Out on NVIDIA? My Best Growth Stock Pick to Buy and Hold

Despite its consistently improving fundamental outlook, this Canadian growth stock has seemingly been ignored by most investors for a long…

Read more »

A worker drinks out of a mug in an office.
Tech Stocks

The Best Stocks to Invest $5,000 in Right Now

Here's why investing in blue-chip stocks such as Visa should help you deliver outsized gains in 2024 and beyond.

Read more »

Young woman sat at laptop by a window
Tech Stocks

3 Stocks I Think Every Canadian Should Own in 2024

Here's why Canadian investors should hold blue-chip stocks such as Microsoft in their equity portfolios in 2024.

Read more »