Buffett’s Greatest Secret — And Why It Matters Today
In a meeting with Warren Buffett, the founder of Amazon, Jeff Bezos, asked him, “your investment thesis is so simple. You’re one of the richest guys in the world and it’s so simple. Why doesn’t everyone just copy you?”
Buffett replied dryly… “Because nobody wants to get rich slowly.”
Everybody knows that Buffett is a good investor. He’s amassed a multibillion-dollar fortune. I relentlessly talk about him in the pages of my premium advisory, Capital Wealth Letter. There are more than 2,000 books dedicated to how Buffett built his fortune.
But Buffett isn’t the world’s greatest investor…
I realize this sounds controversial. And by no means am I trying to diminish his investing acumen. He is a phenomenal investor.
But consider this…
Buffett’s net worth is about $108.5 billion. Of that, $108.2 billion was accumulated after his 50th birthday. Roughly $91 billion came after he qualified for social security in his mid-60s.
Yes, he’s a good investor. But the real key here is that he’s been a good investor for three-quarters of a century.
Stick with me here to see why this matters so much…
Buffett’s Greatest Secret
You see, most people gloss over the fact that Buffett started investing when he was just 10 years old. By the time he was 30, he had a net worth of $1 million, or over $10 million adjusted for inflation.
At just 30 years old, he already had two decades of investing under his belt.
In the book, The Psychology of Money, author Morgan Housel provides a fun thought experiment on just how impactful Buffett’s long investment horizon has been on his net worth. Housel postulates what would happen if Buffett had been a more “normal” kid and spent his teens and 20s exploring the world and trying to figure out what to do with his life. And by the time he was 30, his net worth was say, $25,000.
Then at 30, Buffett still goes on to have the spectacular investing career that he has had, generating 22% annually. And instead of chugging along into his 90s, he retires at 60 years old to play golf, drink Coke, and live out a more “normal” retirement life.
What would his net worth be today?
Not $108.5 billion. The answer?
You see, Buffett is a great investor, but his secret is time.
Why This Matters Today
Hopefully, this drives home two core tenants of investing: time and compounding. With enough time, compounding is our greatest ally.
I’ve talked about the importance of time and patience several times over at Capital Wealth Letter. In my November 2020 issue, I discussed this Buffett “secret.” I also said, “the best skill you can develop as an investor is simply the emotional discipline to be incredibly patient.”
It’s easy to get caught up in the day-to-day. Especially when it comes to investing. In trying times, throwing in the towel and just socking your money away under the mattress or in a regular savings account is easy. But I’d urge you to keep the bigger picture in mind. This is just a hiccup in our road to building wealth.
For those of us with a long investment horizon, a declining stock market is fantastic news. They open the door for us to buy more shares of some of the world’s greatest companies at lower prices.
Finding high-flying growth stocks is fun. But the bulk of your attention should be on finding “no-brainer” additions for your long-term portfolio.
I’ll leave you with something I said back in that issue a couple of years ago.
The more patient you become, the better your investment results will be. Buffett learned this early in his career, and he’s patiently waited for the perfect time to invest in world-class businesses.
To start, keep a list of wonderful companies that have enriched investors for decades. Read about them, study them, see how they respond during good times and bad. Get to know the business.
Then, wait for the market to give you a great opportunity to buy the stock. It’s that simple.
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