How did Berkshire Hathaway get so big
This is how Warren Buffett got rich
Warren Buffett is one of the richest and most successful people in the world. What hardly anyone knows, however, is that they come from a medium-sized working-class family and that they have earned their own money.
In the meantime he has reached an advanced age. Nevertheless, many people already consider him a living legend, from which there is much to be learned.
But how exactly did this man become so successful and wealthy? Exactly this question is answered in detail in the following article.
Warren Buffett laid the foundation for his childhood wealth
Warren Buffett is considered to be the most successful investor of our time. He laid the foundation for his incredible success as a child. Already at the age of 8 he showed that he has a sense of entrepreneurship in his genes. So at this early age he bought cola bottles in larger packs and sold the individual bottles at a higher price. Some time later he increased his pocket money by collecting golf balls and selling them. He also delivered newspapers to earn money.
All of this resulted in a self-made fortune of $ 5,000 at the age of just 14. It should be noted that the value of $ 5,000.00 at the time is much higher than its current value. Warren Buffett had already amassed a lot of money in his teenage years. However, he would later earn his current fortune with shares on the stock exchange.
However, he bought his first shares at the age of 11. These were shares in Cities Service. The young Warren Buffett bought a total of three shares at a purchase price of 38.25 dollars each. He was convinced that the price of the stock should actually be much higher. Nevertheless, the price of the securities he had bought went down first. The price fell to around $ 28 before finally rising to $ 40. Warren Buffett ultimately sold for $ 40, making his first money on the stock market.
By the age of 26, Warren Buffett had amassed a fortune of $ 140,000.00. But his goal was to become a millionaire. A great help along the way was undoubtedly Benjamin Graham. After studying economics, Warren Buffett met the economist and investor Graham. He read his books and learned from the advocate of fundamental securities analysis. Presumably it was Graham who gave him the decisive impetus for his later investment strategy.
The investment in the Berkshire Hathaway company was the initial spark
Warren Buffett undoubtedly has a great passion for finance and money. But there is a clear strategy behind his wealth. The main way the investor built his wealth was by investing in companies that were severely undervalued. It was the same with Berkshire Hathaway at the time. At the age of 35, Warren Buffett invested much of his money in the textile manufacturer Berkshire Hathaway. At that time the company was on the verge of bankruptcy. However, Buffett saw the company's potential and made the investment of a lifetime.
Warren Buffet gets rich with the value strategy
With the textile company, which he converted into an investment company a few years later, Warren Buffett laid the foundation for his gigantic fortune. However, he got rich with the strategy that was the basis of this first major investment. The investor has become rich and legendary through his so-called value strategy.
Warren Buffett doesn't have to worry about his finances, as he always invests in the stock market or in companies according to the same pattern. He always looks at the business models of the companies that are of interest to him. It is important to him that, even as a layperson, he understands how companies earn their money. Warren Buffett's policy is that if he doesn't understand the business model, he won't invest.
➡ Also interesting: This is what star investor Warren Buffett thinks about index funds (ETF)
Investors got rich on the stock market because they differentiate between the value and price of a stock. He always tries to find securities that are far too low for their real value. He set up his finances according to this principle in 1960 and continues to do so today. In principle, every investor can get rich in this way. How exactly this works can be seen in the example of Coca Cola.
Warren Buffett bought large blocks of shares in the shower manufacturer when he was just starting out as an investor. He was and is convinced that people will always be thirsty and he is right about that. The world population is growing inexorably and Coca Cola has enormous market power. It was clear to him early on that Coca Cola had a solid business model that would generate ever higher earnings over the decades. That is why he invested.
In simple terms, it can be said that he invested in a company that was well known and whose business model he understood. He was also convinced that Coca Cola would grow. Therefore, he has invested in the stock market on a large scale and made a fortune. The stocks had a much higher long-term value at the time of investment compared to price. Using the same strategy, he also acquired shares in American Express very early on.
The dot-com bubble made Warren Buffett the definitive legend
In 2000 the share prices in the new market rose to unimagined heights. There was a gold rush atmosphere on the stock exchange, but Warren Buffett withdrew almost completely from the market at this time and was ridiculed by many investors for it. Warren Buffett believed that investing in young and overvalued internet companies was not a good investment. A little later, the dot-com bubble burst and turned the investor into a legend.
His most recent strokes of genius also show how clever his approach is, with which he is always right. After the financial crisis, he invested a lot of money in the ailing bank Goldman Sachs. In his opinion, the bank's papers were severely undervalued. So again there was a gap between the value and price of the stocks. Ultimately, Buffett is also a major shareholder in Apple because he foresaw its success early on and understood the business model.
Buffett's wealth is largely due to the fact that he never speculated in the stock market. In contrast to many other people, he has invested his money in the stock market on a long-term basis. The successful stock market specialist is convinced that most people buy securities in the hope that they will rise. However, this approach amounts to speculation. He, on the other hand, recognizes the future value of a business model and invests because he can assess growth. So far he has often been right about it and has become one of the richest men in the world.
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