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At their annual meetings, Berkshire Hathaway’s shareholders have the opportunity to pick CEO Warren Buffett’s brain on any number of topics.
However, one investor who attended the conference in 1999 cut right to the chase. “Mr. Buffett, how do I make $30 billion?” he asked.
As always, the Oracle of Omaha conveyed complicated theories in simple terms. He shared three fundamental rules that helped him amass his fortune – rules that can guide any investor. Along the way, he offered a reminder: financial fear has never been part of his equation.
If you want to learn the ropes that helped the 93-year-old accumulate a massive fortune, here are some things to consider.
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Circle of competency
Tom Watson Sr., the founder of IBM (NYSE:IBM), once said, “I’m no genius. I’m smart in spots — but I stay around those spots.” That’s the mantra Buffett has applied to his investing too.
By focusing on industries he understands and avoiding temptation to chase trends, Buffett has built his fortune through a disciplined and patient approach. His strategy, however, comes with an important caveat: volatility. At the 2020 Berkshire Hathaway shareholder meeting, Buffett reminded investors of the inevitable ups and downs.
“You’ve got to be prepared, when you buy a stock, to have it go down 50% — or more — and be comfortable with it, as long as you’re comfortable with the holding,” he said.
If you want to expand your circle of competency, you may want to seek advice from a trusted professional. Finding a financial advisor that suits your specific needs and financial goals is simple with Vanguard.
Vanguard’s hybrid advisory system combines advice from professional advisers and automated portfolio management to make sure your investments are working to achieve your financial goals.
With a minimum portfolio size of $50,000, this service is best for clients who already have a nest egg built up but are ready to grow their wealth with a variety of different investments.
All you have to do is set up a consultation with a Vanguard advisor, and they will help you set a tailored plan and stick to it.
Read more: Don’t leave your family unprotected — find life insurance coverage up to $2 million with no medical exam or blood test
Start young
Buffett’s best advice for investors is to get started as early as possible. He has a simple metaphor to explain his wealth-building strategy. “We started with a little snowball on top of a very tall hill,” he said. “We started at a very early age in rolling the snowball down, and of course, the nature of compound interest is that it behaves like a snowball.”
Indeed, the length of Buffett’s career is a key piece of his enormous wealth. He bought his first stock at the age of 11. He’s now 93 years old and still actively investing. In fact, the majority of Buffett’s wealth was accumulated after he turned 65. In 1999, his net worth was just $30 billion. Today, it’s nearly four times greater at $116 billion, as per Bloomberg.
Ordinary investors can best harness the power of compounding by starting as early as possible. A great way to get a foothold on your investing strategy is with Acorns, an automated savings and investment app that makes your spare change go to work for you.
When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess into a smart investment portfolio. For those looking to enhance their investing strategy further, Acorns offers different tier memberships, including a Gold tier that allows you to customize your portfolio by adding individual stocks and includes a retirement account with a 3% IRA match. If you sign up today, you can receive a $20 bonus investment.
If you’re looking for another way to grow your money steadily over time, a certificate of deposit (CD) could be a smart choice. CDs offer a fixed interest rate for specific terms, allowing your savings to grow more efficiently. Just keep in mind, if you need to withdraw your funds before the term is up, you’ll likely face a penalty fee.
With CD Valet – an online CD marketplace – users can shop and compare top certificates of deposit rates from various banks and credit unions nationwide.
Their extensive database shows the most competitive rates without bias, with daily rate updates and earnings calculators which give consumers an array of free tools to help them find the right CD to meet their savings goals.
If you’re looking to build an emergency savings fund, a high yield savings account is the place to begin.
We’ve compiled a list of the Best High-Yield Savings Accounts of 2024 so you can have a streamlined look at what high-yield savings account is best for your savings to grow over time.
Search for small companies
Buffett said that if he were starting again today with $10,000, he would focus first on small businesses. “I probably would be focusing on smaller companies because I would be working with smaller sums, and there’s more chance that something is overlooked in that arena,” he said at the shareholder meeting.
In his early days, the billionaire investor focused on extremely small companies that would be considered small-caps. He bought a tiny furniture company in Nebraska in 1983 when it was still expanding across state lines. He acquired See’s Candies when it made just $4 million in annual profits in 1972.
These small businesses were overlooked and had more room to grow. That means Buffett had a chance to buy them cheap and watch them expand. This is also true now. Small-cap stocks were roughly 30% cheaper than large-cap ones in the final quarter of 2023, according to analysis by BNP Paribas. They have also historically outperformed large caps, especially after recessions and over longer periods of time, says MSCI. It’s advisable to diversify your portfolio and add some small caps to your watch list.
Need some guidance before you make your next big market move?
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Once you’ve done your research, building and managing your portfolio efficiently is key, and that’s where Robinhood comes in.
Regardless of your current net worth, Robinhood makes investing in small or large companies easy. Buffett has always preached about on getting in at a low cost and with Robinhood’s user-friendly interface, you can easily make those trades without extra fees.
With features like automatic investing, in-app guides and 24/7 access to their customer service team, Robinhood also makes it simple for beginners to diversify their portfolios. For those starting small, the app allows you to buy fractional shares for as little as $1, making it accessible to invest in a wide range of stocks without breaking the bank.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
