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Unveiling Buffett’s Road to Riches

We’ve all heard the name Warren Buffett. One of the world’s richest men, the astute investment mogul boasts a whopping $137 billion net worth. But who is the man behind the wealth, and how did Warren Buffett make his money? In this article, we’ll take a deep dive into Buffett’s financial journey and discuss the investment philosophies that have made the ‘Oracle of Omaha’ so successful.

Warren Buffet’s Wealth Timeline

The March to Millions

Warren Buffett is a celebrated American investor, businessman, and philanthropist, most famously known as the Chairman, CEO, and major shareholder of Berkshire Hathaway. Financial professionals widely share and adopt his investment philosophies, with investors using his strategies to secure long-term capital gains. At 93, Buffett remains an active voice for responsible and sustainable investing. Beyond his business acumen, he is a dedicated philanthropist, donating billions to charity organisations and pledging 99% of his wealth to philanthropic causes by the time he dies. To understand how Warren Buffett built his wealth, we have to go back to the 1940s when a young, ambitious boy from Nebraska discovered the true power of smart investing.

1941: Eleven-year-old Warren Buffet buys six shares at $38 each in Cities Services Company. After experiencing a market drop and then a swift rise to $40, he sells his stock for a profit. At age 13, Buffett proclaims he will be a millionaire by 30.
1945: Barely a teenager, Buffett makes a monthly wage of $175 distributing The Washington Post. Using his savings, the 14-year-old invests $1,200 into 40 acres of farmland.
1947: At 17, Buffett goes into business with his friend, purchasing a second-hand pinball machine for $25. They soon owned three machines in different locations across town and sold the business for $1,200.
1949: Buffett amasses $9,800 in savings from his Washington Post paper route.

From Farmland to Fortune

Driven by his goal of making millions, 20-year-old Buffett sets his sights on the Big Apple, a move that sets him on the path to becoming one of the world’s most successful investors.

1950: Warren Buffett applied for Harvard Business School but was rejected. Instead, he attends Columbia University, influenced by securities analysts Ben Graham and Jerry Newman.
1954: Now 24, Buffett accepts a $12,000 starter salary at Graham-Newman Corp.
1956: With over $135,000 in savings, Buffett established and ran his own investment partnership, Buffett Associates Ltd., in Omaha. His partners are family and friends.
1957: Buffett acquires two more partnerships, bringing his management portfolio to five.
1961: The partnerships are now worth millions. Buffett invested $1 million into a windmill manufacturing business called Dempster.
1962: Buffett Associates Ltd. experiences exponential growth and is now worth $7.2 million. He consolidates all his partnerships under one umbrella: Buffett Partnerships Ltd. In the same year, he invests in a textile manufacturing company, Berkshire Hathaway, purchasing stocks for $7.60 each.
1963: Dempster’s stock in the portfolio is now worth over $2 million. Buffett Partnerships Ltd. becomes Berkshire Hathaway’s largest shareholder. He also takes advantage of American Express’ stock drop, betting 40% of partnership assets on the bank’s shares.
1965: Buffett’s Amex investment doubles. He invests $4 million in Walt Disney Co. and takes over Berkshire Hathaway.
1967: At 37, Buffett’s net worth is $10 million. He instructed Berkshire Hathaway to purchase National Indemnity Insurance, the first insurance company Berkshire Hathaway acquired.
1969: Eager to focus on new business ventures, the investment mogul enters Buffett Partnerships Ltd. into voluntary liquidation, portioning its assets to its partners. By the time he turns 39, Buffett’s stake in Berkshire Hathaway amounts to $25 million.

The Berkshire Boom

The dissolution of the partnership opens Buffett to a world of opportunities. He faced many challenges during the 1970s and 80s, but his belief and dedication to Berkshire Hathaway never faltered.

1970: Buffett becomes Berkshire Hathaway’s chairman, beginning his tradition of writing annual shareholder letters.
1973: Buffett takes advantage of falling stock prices, distributing notes at 8%. Berkshire Hathaway acquires Washington Post Company shares.
1977: Berkshire acquires Buffalo Evening News for $32.5 million. A single share of Berkshire Hathaway trades at $290 each. Buffett’s wealth reaches roughly $140 million.
1981: Buffett’s belief in sharing wealth prompts him to establish the Berkshire Charitable Contribution plan with Berkshire Hathaway’s Vice Chairman, Charlie Munger.
1983: Berkshire’s stock portfolio is worth $1.3 billion. Buffett’s net worth is $620 million.
1985: Underperforming textile operations force Buffett to close mills to protect shareholder assets. He facilitates the ABC and Cap Cities merger.
1986: Berkshire Hathaway shares trade at $3,000 each.
1987: October’s stock market crash causes a 25% drop in Berkshire’s share price, resulting in Buffett losing more than $340 million.
1988: Buffett acquires a 7% stake in Coca-Cola, valued at over $1 billion.
1989: Berkshire Hathaway stocks sell for $8,000 each. Buffett’s wealth reaches $3.8 billion.
1993: Berkshire acquires Dexter Shoe Company, and Berkshire Hathaway’s stock splits, increasing market capitalisation. Buffett’s net wealth reaches $8.3 billion.
1994: Berkshire acquires Helzberg Diamonds. Buffett focuses on acquiring well-established brands with strong cash flows.
1996: Berkshire acquires Dairy Queen, with Buffett’s net wealth reaching $16.5 billion.
1998: Berkshire acquires NetJets, marking its entry into the luxury and aviation sectors. Buffett’s net wealth reaches $30 billion.

Crises Fuels Compounding

Warren Buffett’s investment strategy has been marked by strategic decisions that have slowly compounded his net worth and Berkshire Hathaway’s growth. Through time, market crises have not impacted his growth journey, in fact, he has benefited from them.

2000: The dot-com bubble bursts, validating Buffett’s cautious approach to tech investments, making Berkshire Hathaway’s portfolio resilient. Net wealth: $28 billion.
2003: Berkshire Hathaway acquired McLane Company and accumulated a significant stake in PetroChina. Net wealth reaches $32 billion.
2003: PacifiCorp is acquired, marking a significant move into the energy sector.
2007: Marmon Group is bought for $4.5 billion. Net wealth: $52 billion.
2008: The global financial crisis hits, but Buffett makes strategic investments in Goldman Sachs ($5 billion) and General Electric ($3 billion).
2009: Markets recover, leading to Berkshire Hathaway’s stock price rebound. Buffett acquires Burlington Northern Santa Fe Railway. Net wealth: $37 billion.
2011: Buffett purchased a significant stake in IBM and acquired Lubrizol for $9 billion. Net wealth: $57 billion.
2013: Berkshire Hathaway and 3G Capital acquire H.J. Heinz for $28 billion.
2015: Acquired Precision Castparts for $37 billion and began building a significant position in Phillips 66, an energy manufacturing and logistics company.
2016: Buffett increases his stake in Apple Inc., one of Berkshire Hathaway’s most profitable investments. Additionally, Buffett donates $2.9 billion to various charities, and his net wealth has reached $60.8 billion.
2018: Buffett invests significantly in financial institutions, including Bank of America and JPMorgan Chase. Berkshire Hathaway acquires a stake in StoneCo. Net wealth: $82.5 billion.
2022: Buffett benefits from Apple Inc.’s strong performance and strategic investments in energy and financial sectors. BRK-A shares closed over $500,000 for the first time. Net wealth: $100.5 billion.
2023: Expands investments in technology and healthcare sectors. Berkshire Hathaway acquires Alleghany Corporation for $11.6 billion.

The Power of Compounding

Around 90% of Warren Buffett’s wealth has been accumulated since 1982 when his net worth was about $0.5 billion. The exponential growth in his wealth is largely due to the compounding effect of his investments over time, particularly evident in the past few decades.

Warren Buffett’s investment journey is a testament to the power of smart, disciplined investing. By studying Buffett’s wealth timeline, we can see how Buffett has successfully leveraged the power of compounding. Here are some of his core principles:

Never Lose Money

“If you spend money on things you don’t need, soon you’ll have to sell the things you do need.”

Buffett emphasises making smart investments to avoid losses. While market downturns are inevitable, investing wisely and avoiding a gambler’s mentality is key. Sustainable wealth is built on cautious and deliberate decisions, not quick gains.

Focus on the Long-term

“Predicting rain doesn’t count; building the ark does.”

Buffett’s success comes from long-term investments in businesses with substantial growth potential. He thoroughly evaluates companies, from management styles to market competition, ensuring that his investments are sound for the long haul.

Understand the Investments You Make

“Risk comes from not knowing what you’re doing.”

Invest in industries and companies you understand. Buffett advises conducting thorough research before investing. Assess a company’s competitive edge, sustainability, and long-term prospects. Informed investments help mitigate risks and protect assets.

Avoid Borrowing

“You can’t borrow money at 18 or 20 per cent and come out ahead.”

Buffett warns against using borrowed money for investments, as market declines can lead to debt and poor decision-making. Responsible investors use their own funds, avoiding the pitfalls of high-interest loans and financial stress. If you don’t have money to invest, don’t invest.

Be Patient

“Someone is sitting in the shade today because someone planted a tree a long time ago.”

Markets drop, and trends dissipate – patience is crucial in investing. Buffett advises against chasing trends or making hasty decisions. Successful investors focus on long-term growth, compounding interest, and staying calm amidst market fluctuations.

Global Masters: Long-term Capital Growth

With a successful career spanning decades, Warren Buffett has proved that his investment principles lead to long-term wealth creation. At Global Masters Fund, we share his commitment.

We are dedicated to maximising long-term capital growth through responsible investment in high-quality assets. Investing in global companies provides our investors with a tax-efficient vehicle for long-term capital growth. Our strategy offers consistent, above-average returns, ensuring that your investments grow over time.

If you aspire to invest like Warren Buffett, we can help. With an extensive portfolio, including Berkshire Hathaway as a principal holding, our mission is to increase shareholder wealth through strategic, long-term investments.