Key Points
Buffett’s particular investing record is hard for anyone to match.
Most of us have an advantage or two over him, though.
There are several strategies you might employ to try to beat Buffett.
You’ve probably heard of Warren Buffett, but you may not appreciate just how impressive an investing record he has. He has been at the helm of his company, Berkshire Hathaway ( NYSE:BRK.A ) ( NYSE:BRK.B ), for more than 50 years, and in that time the company’s value has increased at an average annual rate of about 20%. To put that in perspective, the S&P 500 has averaged around 10% over the same period. Want more perspective? A 20% growth rate will turn a single $1,000 investment into about $9 million over 50 years!
Most of us would love to have investing results like that. It’s no easy feat to accomplish, but if you want to try to beat — or even meet — Buffett’s average, here are some ways to go about it, including some advantages you may have over Buffett. You can do quite well even if you fall short. Start young — very young
One important contributing factor to Buffett’s longtime ranking among the world’s richest people is simply that he has been busy growing his wealth for more than 80 years. He was selling sticks of gum when he was just six years old, for example, and delivering gobs of newspapers as a young teen — earning thousands of dollars and buying himself a farm. He bought his first shares of stock at age 11.
It’s probably too late for you to start earning and investing money at such a young age, but take a moment to appreciate the power of time and dedication. You might get your children or grandchildren interested in investing very early, and that can pay off well for them throughout their lives. Live a very long life
It also helps to live a long life. Buffett will turn 92 this year — and he’s still working and investing. You might not want to be an active investor or worker into your 90s (not to mention your 80s), but doing so can help your portfolio grow powerfully.
A more manageable strategy for many people is simply to work a few years longer than they may have planned to work. Doing so has many advantages. For one thing, you’ll have more years in which to save and invest money for your retirement . You may also be able to remain on your employer’s health insurance plan, which may save you money. If you’re delaying starting to collect Social Security , that will make your checks bigger. And every year that you’re still working is one less year in which your nest egg has to support you. That can make it last longer. Win “the ovarian lottery”
If you’re sensing that it might be much harder than you expected to outperform Buffett, you’re right. He credits much of his success to his having won “the ovarian lottery.” In other words, he was born at the right time, in the right place, and in the right circumstances to be well positioned to make a lot of money. It also helps that he has a brain and temperament that’s particularly well suited to business and investing.
It’s too late for most of us to be born in Omaha in 1930, but if you’re reading this article on a computer or smartphone, you have probably won your own ovarian lottery. After all, more than a billion people on earth are struggling to live on a few dollars per day. And if you’re online, that means you are able to tap a host of educational and enlightening information about business and investing — with a few keystrokes. Take advantage of not being super rich
Here’s one way that you’ve got an advantage over Buffett: You’re a much smaller investor. He has grown so rich that it’s hard for him to make much money investing in small companies. For a stake in a stock to make a meaningful difference in his portfolio, he needs to buy a lot of it, and that can be hard to do without driving up the price.
It’s — not surprisingly — proving hard for Buffett to earn outsized returns when his company is so large. (Its market capitalization was recently around $700 billion.) In Berkshire’s first 25 years, there were 13 years in which the company’s stock value […]
Protected by Patchstack