The Easily Copied Secrets to Warren Buffet’s Billions

Warren Buffett, generally considered one of the world’s best investors earned his billions by (1) generating high investment returns and (2) taking very easy steps all of us can readily copy to compound investment gains into substantially higher wealth.  Here they are:

  1. Do not pay any extra taxes – his company Berkshire Hathaway does not pay a dividend and Buffett has held onto shares for over 50 years.  This means he has not paid one dollar of tax on his ownership of these shares as they increased in value by billions.
  2. Do not overpay for investment advice or services.  Buffett is highly skeptical of the value of paying high fees for investment advice.  He is known for purchasing companies without using investment bankers and obviously he pays no fees for his Berkshire Hathaway holdings.
  3. Invest in very high quality companies and own them for a long, long time.  Berkshire Hathaway has an equity portfolio of blue chip companies like Coca Cola and American Express that have been owned for multiple decades.

You can very easily copy these secrets – Invest in high quality companies and them hold forever.  You can implement yourself via directly owning stocks or a diversified portfolio of low cost ETF’s.  For many people this may be too much work and they should get low cost financial advice to implement.

Over a 30 year time frame, this strategy can turn a $100,000 investment into $1.6 million.  This is 105% higher than expected when investing in a typical mutual fund (assumes compound annual returns of 10.2%, which equals the average for U.S. large stocks since 1926, and Federal and NY tax rates for a married couple with taxable income of $500,000).

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Source for all return data is “2020 Stocks, Bonds, Bills and Inflation Yearbook”, Roger G Ibbotson and Duff & Phelps. For our full disclosures, click here.