Why is Warren Buffett really that rich

Warren Buffett: How he got rich

Warren Buffett has been one of the richest people in the world for years.

In 2012, he was ranked third on Forbes' list of the richest people behind Carlos Slim Helú and Bill Gates.

His personal wealth is estimated at around $ 44 billion. Despite this wealth, Warren Buffett still lives in the house he bought more than half a century ago.

This down-to-earth attitude is part of his recipe for success. To understand how Warren Buffett got rich, one must first look at his background and strategies.

Warren Buffett's early years

It is reported that Warren Buffett earned his first money back in 1936, at the age of 6.

He is said to have bought Coca-Cola in six-packs and sold them as individual bottles at a profit.

He is said to have made money later by collecting and reselling used golf balls, delivering newspapers and renting pinball machines.

Buffett first came into contact with stocks at the age of 11. He acquired 3 preferred shares in Cities Service, which he sold at a profit after a temporary low.

Before his 18th birthday he bought a farm, which he leased, and a Rolls-Royce, which he rented out with friends.

While these activities did not bring him any financial fortune, it did indicate the keen business acumen Warren Buffett possessed from an early age.

Warren Buffett's education and first company start-up

After Warren Buffett had studied at Wharton School and the University of Nebraska, he graduated from Columbia University in 1951.

One of his lecturers there was investment guru Benjamin Graham, who is considered the father of fundamental securities analysis. In 1954, Buffett finally began working for Graham's brokerage firm as a securities analyst.

In 1956, Warren Buffett founded the Buffett Partnership. Friends and relatives contributed US $ 105,000, Buffett contented himself with a symbolic deposit of US $ 100.

After Warren Buffett had already started to acquire shares in the Berkshire Hathaway textile company for his partnership in 1962, he was able to gain complete control of the company in 1965.

In 1969 he dissolved his partnership. Their capital at the time was around $ 105 million.

It can be said that Warren Buffett got rich with this partnership. It is estimated that his net worth at the start of the partnership was US $ 100,000, and in 1959 he was worth US $ 400,000.

Buffett now focused primarily on Berkshire Hathaway and restructured the company into a holding company with a focus on the insurance business.

Since taking over Berkshire Hathaway, Buffett has managed to achieve an average annual return of over 20% through clever investments.

Warren Buffett's investment strategies

In order to be able to answer the question of exactly how Warren Buffett got rich, one has to take a closer look at his investment strategies.

Some principles govern his approach. So he has to understand the business model of the companies he is betting on. This is mostly not the case with technology-oriented companies, for example, so that he hardly invests in them.

In addition, there is often talk of the intrinsic value of a share. This can and should differ from the actual share price. So it means: Buy stocks of a good quality company at an affordable price.

Companies should also have proven their strengths. Market leaders, whose profits have increased steadily over the years, are generally considered to be attractive.

Buffett also recommends focusing investments. He wrote the following quote: "If you have a harem with forty women, you don't really get to know any one."

It is therefore important to know companies well in order to know that an investment is worthwhile.

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