Warren Buffett shared how he 'killed the Dow' decades ago — now the billionaire is certain he could earn a whopping 50% per year if he had less than $1 million today. Here's how
We adhere to strict standards of editorial integrity to help you make decisions with confidence. Some or all links contained within this article are paid links.
Investing legend Warren Buffett is renowned for generating oversized returns. From 1965 to 2023, his company Berkshire Hathaway delivered compounded annual gains of 19.8%, substantially outperforming the S&P 500’s 10.1% average annual return during the same period.
Today, Berkshire’s stock portfolio totals over $331 billion. However, Buffett believes that the massive size is actually a disadvantage and that he could achieve relatively better results if he were managing smaller amounts of money.
Don't miss
Commercial real estate has beaten the stock market for 25 years — but only the super rich could buy in. Here's how even ordinary investors can become the landlord of Walmart, Whole Foods or Kroger
Car insurance premiums in America are through the roof — and only getting worse. But 5 minutes could have you paying as little as $29/month
These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. Here's how
Back in 1999, he told Bloomberg Businessweek that “it’s a huge structural advantage not to have a lot of money.”
This perspective comes from personal experience.
“Anyone who says that size does not hurt investment performance is selling. The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers,” he said.
And he was confident that he could do it again, stating, “I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."
Twenty-five years later, that confidence hasn’t been shaken.
Read 20,000 pages
During this year’s Berkshire annual shareholders meeting, an audience member asked Buffett what method he would use to achieve that 50% annual return today starting with less than $1 million.
“The answer would be, in my particular case, it would be going through the 20,000 pages [of Moody's Manual],” Buffett said.
Moody's Manual was a series of publications by financial services company Moody's on publicly traded stocks. These texts provided detailed information on various industries, companies and securities.
Buffett says he was able to acquire extensive knowledge of how different industries and companies functioned, even little-known ones, thanks to his dedicated research. He believes this type of behavior can provide an edge.
“I don’t know what the equivalent of Moody’s Manual or anything would be now, but I would try and know everything about everything small, and I would find something,” he said.
Modern platforms like tastytrade can give you an edge over Buffett’s methods from the 50s.
tastytrade provides an extensive range of tools for risk management and informed investment choices. The platform also delivers interactive content with daily valuation trading insights.
With no additional charges for broker-assisted trades and a competitive margin base rate of 10%, tastytrade aims to lower costs for margin trading so you can build a portfolio worth bragging about.
At Berkshire Hathaway's 2021 shareholders meeting, he stated, frankly, “I do not think the average person can pick stocks.”
Instead, he has repeatedly said that most people should invest their money in a low-cost, S&P 500 index fund.
If you’re ready to follow this simple but sound adviceand you want to take a more automated approach to investing, you will need a tool for managing your investments.
Wealthfront is an automated investing and financial services platform that can help you grow your money in a way that aligns with your appetite for risk and investing goals.
Starting with just a few simple questions, Wealthfront’s app can help you determine the optimal asset allocation by crafting a diversified portfolio spanning a range of assets. You can choose from stocks, ETFs, bonds and real estate, all in one place.
Read more: Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)
An alternative to the stock market
If you’re looking for the big returns that made Buffett a legend, you might also know that the real estate market is one of the top ways that experienced investors grow their money.
While the market was traditionally barred to those without lots of up-front capital, now platforms like Arrived allow investors to tap into the potential gains of the real estate market with investments as low as $100.
Arrived allows you to invest in shares of rental homes and vacation rentals without taking on the responsibilities of property management or homeownership.
On their platform, you can browse a curated selection of homes, each vetted for their appreciation and income potential. Once you find a property you like, simply choose the number of shares you want to buy and start investing in this potentially wealth-building market.
If you are already an accredited investor, you’re not limited to only investing in residential real estate. Platforms like First National Realty Partners (FNRP) let you take advantage of the sector with professionally-vetted deals.
FNRP gives you access to necessity-based real estate — such as grocery stores or healthcare facilities. These properties are essential to the local community, often leased by national brands, and likely to remain desirable. You can browse their listings, and select shares of the properties you believe will have the highest potential for returns.
Once a deal is closed, FNRP’s team of experts manages the property, so you can focus on finding more deals you love.
Replicating success
As Buffett stated, if he had to start with just $1 million today, he would arm himself with knowledge by going through today’s equivalent of Moody’s Manual in detail to find opportunities — including ones that may not be suitable for large funds.
You can still find these texts today — they are called Mergent Manuals. Mergent, Inc. acquired Moody's Financial Information Services division in 1998.
Investors today can also take advantage of tools and resources that didn't exist when Buffett first started investing, such as internet databases. For example, the EDGAR database from the U.S. Securities and Exchange Commission allows investors to access detailed filings and reports submitted by publicly traded companies.
Another excellent resource for budding finance gurus is the Motley Fool Stock Advisor. This subscription-based service provides users with market insights and expert stock picks, so you can better allocate your money to get the returns you want.
From stock analysis to market reports, Motley Fool has a community of more than half a million investors and it’s a one-stop-shop for valuable investing tips to help you improve and diversify your portfolio like a pro.
Keep in mind that Buffett's answer is what he would do, not necessarily what the average person should do. He considers investing to be his passion, and has previously expressed that stock picking is not an optimal strategy for average investors.
While the investing legend believes a 50% annual return is achievable, he acknowledges it requires more than just ambition.
“With $1 million, you could earn 50% a year, but you have to be in love with the subject. You can’t just be in love with the money,” he explained. “People find other things in other fields because they just love looking for them.”
If you’d like to invest but aren’t yet sure what your risk tolerance or investing goals are, you should consider hiring an expert to help.
Advisor.com is an online platform that connects you with vetted financial advisors. Just answer a few quick questions about yourself and your finances, and the platform will match you with experienced financial professionals best suited to help you understand how to invest your savings and grow your wealth.
You can view the advisors’ profiles, read past client reviews, and schedule an initial consultation for free, with no obligation to hire.
What to read next
Stop crushing your retirement dreams with wealth-killing costs and headaches — here are 10 'must-haves' when choosing a trading platform (and 1 option that has them all)
Jeff Bezos and Oprah Winfrey invest in this asset to keep their wealth safe — you may want to do the same in 2024
Rich young Americans have lost confidence in the stock market — and are betting on these assets instead. Get in now for strong long-term tailwinds
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
