How does one go from buying a used pinball machine as a teenager to being the sixth wealthiest person in the world? Well we’re about to find out In this article, we’ll take a closer look at the life and investment career of Warren Buffet, the most successful investor in history. We’ll learn how Warren Buffet grew his wealth from $5,000 to $100 billion!
Early Years Warren Buffett showed an early interest in business and investing. His interest was sparked by a book he borrowed from the Omaha library at age seven, “One Thousand Ways to Make $1000.” Buffett’s early childhood years were filled with entrepreneurial endeavors. He sold chewing gum, Coca-Cola bottles, and weekly magazines door-to-door as one of his first business ventures. Delivering newspapers, selling golf balls and stamps, and detailing cars were some of the ways he earned money while still in high school. On his first income tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper route. When Buffett was a teenager, he and a friend bought a used pinball machine for $25 and put it in a barber shop in their neighborhood. Several months later, they had a thriving business with three different barbershops across Omaha. They would later sell the business for $1,200.
Key Takeaways: One of the key takeaways from this section is that young Warren read all the books he could on stocks and investing. He innately knew that knowledge is power and he spent all of his time reading.
Investor Benjamin Graham Influenced Young Buffett Buffett’s interest in the stock market and investing dated back to his schoolboy days where another book sparked his interest, “The Intelligent Investor,” by Benjamin Graham. His father took an interest in educating the young Buffett, at one point taking him to visit the New York Stock Exchange when he was 10. At age 11, he bought three shares of Cities Service Preferred for himself, and three for his sister Doris Buffett. At 15, Warren made more than $175 monthly delivering Washington Post newspapers. In high school, he invested in a business owned by his father and bought a 40-acre farm worked by a tenant farmer. He bought the land when he was 14 years old with $1,200 of his savings. He later sold this business to a war veteran. By the time he finished college, Buffett had accumulated $9,800 in savings (about $112,000 today).
Key Takeaways: Work hard so you can build your savings, then use your accumulated earnings to buy a cash-flowing asset. After you have built a sizeable amount and appreciated the business, sell for a profit so you can leverage into another business.
Early Business Career In 1954, Buffett accepted a job at Benjamin Graham’s partnership. His starting salary was $12,000 a year (about $121,000 today). Graham was a tough boss. He was adamant that stocks provide a wide margin of safety after weighing the trade-off between their price and their intrinsic value. In 1956, Benjamin Graham retired and closed his partnership. At this time Buffett’s personal savings were over $174,000 (about $1.73 million today) and he started Buffett Partnership Ltd.
Key Takeaways Even Buffett had to work a 9-5 to get started but he quickly leveraged the knowledge he had gained from his mentor and from all those years of reading to own his own company.
Buffett’s Home in Omaha, Nebraska Buffet grew his partnerships from three In 1957 to five in 1958, six in 1959, and seven in 1960. He asked one of his partners, a doctor, to find ten other doctors willing to invest $10,000 each in his partnership. Eventually, eleven agreed, and Buffett pooled their money with a mere $100 original investment of his own. This is no doubt a testament to his speaking ability which he most likely sharpened by taking a Dale Carnegie speaking course earlier in his career.
Key Takeaways Always keep learning new things even if it may seem like it’s not in your profession, you can always add it to your skill set. You never know when it will come in handy.
Assuming Berkshire In 1962, Buffett became a millionaire because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett. He merged these partnerships into one. Buffett invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway. He began buying shares in Berkshire from Seabury Stanton, the owner, whom he later fired. These shares would eventually grow into one of the most successful investments in history. Buffett believed in what has been coined as Value Investing and made many important investments based on this strategy that have led to some long-term successes such as Coca-Cola, American Express, and Heinz. However, these investments also had their share of failures such as Fruit of the Loom. But because Buffett had amassed so much wealth at this point in his life, he was able to buy out Fruit of the Loom’s company founder and save it from bankruptcy. He then used his financial power to make what would eventually become one of America’s most successful apparel companies by helping it get back on its feet after years of struggling. Currently, his net worth is over $100 billion making him the world’s sixth-wealthiest person.
Buffett’s investment philosophy is incredibly simple and straightforward. He believes that the best way to make money in the stock market is to invest in good companies with great business models that have a bright future ahead of them. In other words, he buys stocks when they are going up rather than trying to time the market or swing for the fences with risky investments like penny stocks. What does this mean for you? If you follow his strategy, you won’t be able to buy the latest hot stocks that are taking off in price, but you’ll still be able to get solid returns and potentially win the stock market lottery. The key thing to remember is that most of your money should go towards stocks that have a strong earnings history and good business models. If you want to read more about Warren Buffett’s investment strategies and philosophy, check out the book that influenced him “The Intelligent Investor,” by Benjamin Graham. So, whether you’re investing in your future or investing for someone else, keep these tips in mind to get the most out of your money.
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