6 Ways To Get Rich the Warren Buffett Way
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Warren Buffett, affable billionaire, chairman and CEO of the investment holding firm Berkshire Hathaway, is often held up as a model of successful investment strategy since no one can argue with the numbers after his name; his personal net worth is valued at more than $119 billion dollars, and his company remains in good standing.
But at one point, Buffett was just a humble person with average income, not a billionaire, so what steps did he take to build wealth? GOBankingRates explains six ways to get rich the Warren Buffett way.
Start Investing Early
No matter how young or old you are, it’s never too early to start investing. Buffett bought his first stock at the age of 11 — Cities Services Preferred Stock. And even then, the glimmer of investing genius was clearly there; he sold that stock later for a 4.6% gain and had $1,000 to invest in his next venture by age 14.
Get a Financial Mentor
If you’re relatively green in the realm of financial education, don’t try to get wealthy by guessing — educate yourself! And if you want to follow in Buffett’s footsteps, do it by pursuing a mentor who has more knowledge than you. Whether you watch someone’s videos, buy books, take classes or speak to a financial professional, you’ll be more likely to make savvy money decisions. Buffett studied economics and finances in college, both at the University of Nebraska, the University of Pennsylvania’s Wharton School and Columbia University. There he met an instructor named Benjamin Graham, who taught several courses that whetted Buffett’s appetite for knowledge. He even later worked for Graham at his company, Graham-Newman, and learned investing principles he would carry over into his career.
Invest In the Tried and True
When you do finally begin investing or taking your investments more seriously, don’t risk too much of your money on untested companies or products that don’t have a reliable history of returns behind them. Every year Buffett writes a letter to Berkshire-Hathaway’s stockholders, and in a 1996 letter, he famously wrote, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
In the most recent letter, he reminded shareholders that he and vice-chairman Charlie Munger make “investments in businesses with both long-lasting favorable economic characteristics and trustworthy managers.” Among the stocks that Buffett personally holds are companies such as Coca-Cola, Johnson & Johnson, Proctor & Gamble and other well-known names.
Try Value Investing
Buffett has built his wealth by doing essentially the same thing over all these years, known as “value investing,” which he learned in Graham’s classes in college. Value investing is a strategy of investing in undervalued companies that show a potential for growth and then sticking with them for the long haul. It involves being able to assess whether these companies can go the distance. In this approach, you look for signs that a company can survive, ranging from some kind of competitive advantage, a strong brand or a dedicated customer base.
Avoid Get-Rich-Quick Schemes
You won’t find Buffett jumping on the latest trend. He’s notoriously disdainful of cryptocurrencies, which, while they have made some people very rich, have also lost people a lot of money. In 2018, he predicted they would “come to a bad ending.” And Buffett doubled down on CNBC TV in 2020, saying, “Cryptocurrencies basically have no value and they don’t produce anything. They don’t reproduce, they can’t mail you a check, they can’t do anything, and what you hope is that somebody else comes along and pays you more money for them later on, but then that person’s got the problem. In terms of value: zero.”
Buy When the Market Is Low
Buffett is reported to have said, “Be fearful when others are greedy and greedy when others are fearful,” according to Investing.com. He’s been known to take advantage of market crashes or overcorrections to buy companies for less than they’re worth when he is sure the value will recover later on. But he’s rarely driven by greed to buy a stock or a company just because it seems like the hot next thing or everyone is jumping on a trend.
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