When it comes to investing, many know that starting young has a lot of advantages. Warren Buffett must have agreed as he bought his first stock at age 11. And with a net worth of around 85 billion in late 2020, Warren Buffett is one of the most well known investors of all time.
But unlike many of the other richest people in the world, Warren Buffett did not get rich by starting and growing a single company. He got rich by investing in other companies.
How He Did It
Early on, Warren Buffett worked a number of jobs including investment salesmen and analyst. But where Warren was able to really build his wealth was when he started a partnership where he invested other people’s money as well as his own. Early on, he invested money for only family and friends.
With his investors’ (and some of his own) money, he would find companies that he felt were undervalued and invest in them.
Warren structured the partnership so that he only made money when his investors were making money. Because Warren was so good at what he did, he made many people millionaires and built incredible wealth for himself in the process.
He now owns and makes his investments through his holding company Berkshire Hathaway.
What We Can Learn
Volumes have been written about Warren’s life and his investing lessons but here are a few great tips that apply to all of us.
Tip #1: “Be fearful when the world is greedy and be greedy when the world is fearful”.
Investing is emotional. It can be hard to stay strong when the market drops. But as Warren Buffett points out, market drops are an opportunity to be “greedy” and buy investments on a “discount”.
Tip #2: “Our favorite holding period is forever”.
Buffett loves to hold investments for a long time. He understands how powerful long-term investing can be. He finds an investment strategy that makes sense for him and he sticks to his plan.
Tip #3: “Someone’s sitting in the shade today because someone planted a tree a long time ago”.
Many of the great things in life (including financial freedom) don’t happen overnight. They take a lot of time, planning, and effort.
The choices that we make today will plant seeds for our future to ensure that we have the “shade” that we need down the road.