Warren Buffett grew his wealth in the following three ways:
He saved (he didn’t spend it!).
He earned above average investment returns - through stocks and businesses.
He started young and stayed alive. Time worked its magic through compounded interest.
All three are important. You can’t invest well if you can’t save. And investing well isn’t much good without the aid of time.
Here’s a little exercise you may find interesting. At 15% per year, an investment will grow from $1 thousand to $1 million in around 50 years. In just under 100 years, the investment will grow into $1 billion.
I started with $1,000 when I was 16. So far I’ve been able to compound it at more than 15%. Now if I can only figure out how to live until I am 116!
It’s easy to think that Warren Buffett’s methods are not available to you and to me. But actually, we can all save more, we can all invest better, and we can all take steps to live longer.
If you are interested in learning more about Warren Buffett, might I suggest reading Roger Lowenstein’s book, Buffett: The Making of an American Capitalist. It’s written very well, and captures what makes Mr. Buffett so interesting as a businessman, as an investor, and as a person.