Should You Invest Like Warren Buffet or Elon Musk? 3 Differences in Their Strategies

While investors come in all stripes and styles, it’s difficult not to look at Warren Buffett and Elon Musk — two of the most financially successful men in the world — as defining the two polar extremes of the investment world. Buffett — the “Oracle of Omaha” — created his massive wealth via the slow, patient and steady fundamentals of value investing, often playing a long game and creating revenue over the course of decades.

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Contra to that, Musk is something of a wild, unpredictable disruptor, often seeking immediate gains and change with a ceaseless (some might say chaotic) push towards his various endgames. As Picture Perfect Portfolios noted, Musk is a man moved by audacity and quick execution, while Buffett maintains logic and slow and steady caution.

It’s hard to argue that one billionaire’s methodology is better than the other. While Musk certainly has more money — with a net worth of $355 billion, he’s the richest person in the world — it’s not as if Buffett is struggling to make ends meet with his colossal net worth of $158 billion. That said, identifying the contrasting investment strategies of the two men may aid other investors in discovering which broad financial style is best suited to them.

Also here’s why Buffett doesn’t own Tesla stock.

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Investing Style

Buffett has predicated his enormous wealth upon value investing — that is, the strategy locating stocks that are undervalued but will likely eventually be recognized for their true worth and thus will appreciate in price. It’s a method that fundamentally requires a long-term approach, spending time researching, sniffing out bargain values and performing complicated analysis.

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Musk’s style works almost in opposition to this; rather than seek out undervalued companies and stocks, he reaches for (and invests in) gargantuan ideas — such as SpaceX to spread humanity throughout the stars, Tesla to move humanity to more sustainable energy methods and Neuralink for human-machine interfaces. It’s a bold, wildly risky style that often focuses on generating profit more for the pursuit of the ideas rather than the pursuit of profit itself, according to Picture Perfect Portfolios.

Risk

Buffett is an investor always on the lookout for “a margin of safety,” which is to say, a reduction in market fluctuations that could damage his investment portfolio (this is why he avoided the dot-com boom the 1990s, which seemed to cost him at first, until he also avoided the dot-com bubble bursting thereafter). Musk, however, sometimes appears to do nothing but take risks, often betting millions — or billions — that an idea of his would work, from Tesla to SpaceX to the Trump presidency.

Innovation

As Picture Perfect Portfolios recounted, Buffett tends to invest in the fields of banking, energy and insurance. These are reliable investment models, but they don’t’ exactly highlight or focus upon innovation. Meanwhile, Musk seeks innovation to an outright disruptive degree, with Tesla changing the auto landscape and SpaceX advancing the ideas of space travel (and, again, one could argue his investment in Donald Trump’s campaign is Musk’s most disruptive investment thus far).

Which Investor Should You Follow?

Clearly, there are pros to following either man: Buffett’s safe and careful style led to life-changing wealth for the “Oracle,” Musk’s risk-taking big idea strategies have made him the wealthiest human being alive. Conversely, there are cons: Buffett’s could be considered overly-cautious and requires a great deal of time and patience, while Musk’s level of risk-taking could lead to a financial crash and burn.

Ultimately, given the extreme risk of Musk’s style (not everyone has over $300 billion to protect themselves if an investment goes south), the slow but steady style of Buffett might be best for most investors, as it is a methodology designed to minimize risk and pay off over the decades. However, if you’re not afraid of betting it all (and possibly losing it all), Musk’s larger-than-life approach may be the way for you.

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