Warren Buffett once shared how he could've turned $114 into $400K back in 1942 with 1 dead-simple investing technique — here’s why you can use it to your advantage now

Warren Buffett once shared how he could've turned $114 into $400K back in 1942 with 1 dead-simple investing technique — here’s why you can use it to your advantage now
Warren Buffett once shared how he could've turned $114 into $400K back in 1942 with 1 dead-simple investing technique — here’s why you can use it to your advantage now

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Warren Buffett started his investment journey early, entering the stock market at 11 years old.

“I bought my first stock when I was 11 years old. It was the first quarter of 1942, shortly after Pearl Harbor. I spent $114.75,” he shared in a 2018 interview with Yahoo Finance.

He used that money to purchase three shares of Cities Service preferred stock, a natural gas company that no longer exists today.

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Buffett shared this story not to emphasize how early he started investing, nor did he disclose the performance of that particular investment. Instead, he highlighted the potential growth that could have been achieved by adopting a simpler, long-term investment strategy rather than actively picking stocks.

“If I put that $114 into the S&P 500 at that time and reinvested the dividends, think of a figure as to what it would be worth today?” he posited.

The amount is significant.

“The answer is about $400,000,” Buffett revealed. “So if I as a little kid had taken that 114 bucks I’d saved shoveling snow or whatever I’d done — $400,000 today. One person’s lifetime. That’s America.”

Riding the ‘huge tailwind’

Remember, Buffett made that comment in 2018. And the S&P 500 has continued to climb since the interview, meaning the $400,000 would have kept growing.

The benchmark index has surged by about 87% in the last five years.

Buffett told Yahoo Finance that turning $114 to $400,000 doesn’t require his specific set of skills.

“That isn't me. It is the huge tailwind the American economy gives to any equity investor,” he remarked.

Riding this tailwind can be done at minimal cost these days. For instance, the Vanguard S&P 500 ETF (VOO), which follows the S&P 500, has a low expense ratio of 0.03%. Similarly, the SPDR S&P 500 ETF Trust (SPY) tracks the same index and carries an expense ratio of 0.0945%.

It’s also easier than ever to access the market. Interactive Brokers allows you to buy and sell stocks and ETFs without commission fees or minimum investment requirements.

Notably, IBKR Lite simplifies investing with unlimited free trades of U.S.-listed stocks and ETFs. It also lets you buy fractional shares, flattening new investors' learning curve.

Read more: 'It's not taxed at all': Warren Buffett shares the 'best investment' you can make when battling rising costs — take advantage today

Invest in productive assets

Buffett is known for his preference for productive assets over speculative ones.

In his 2011 letter to shareholders, Buffett elaborated on this investment focus. “My own preference… investment in productive assets, whether businesses, farms, or real estate,” he wrote. “Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment.”

Buffett highlighted real estate as a productive asset for good reason: it generates rental income.

“[If] you offer me 1% of all the apartment houses in the country and you want another $25 billion, I’ll write you a check. It’s very simple,” the legendary investor said in 2022.

Of course, you don’t need billions of dollars to get in the game. You don’t even need to buy a house to start investing in real estate, thanks to platforms like Arrived.

Backed by world class investors like Jeff Bezos, Arrived’s easy-to-use platform allows you to invest in fractional shares of vacation and rental properties without the responsibilities of property management or homeownership.

Start by browsing a curated selection of homes, vetted for their appreciation and income potential. Once you find a property you like, choose the number of shares you want to buy and start investing with as little as $100.

For accredited investors who feel more ambitious, there’s also First National Realty Partners, a platform that enables accredited investors to invest in institutional-quality, grocery-anchored commercial real estate.

With a focus on essential needs-anchored properties, First National Realty Partners invests in stable assets that can provide long-term, predictable cash flow. Boasting an expanding portfolio of top brands, the platform works with national tenants such as CVS, Kroger, Walmart and Whole Foods.

‘I could make you 50% a year’

Today, Buffett’s company, Berkshire Hathaway, has a total stock portfolio of over $380 billion. However, he believes that the massive size is a disadvantage and that he could achieve better results if he managed smaller amounts of money.

“I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that,” Buffett famously stated.

During this year’s Berkshire annual shareholders meeting, an audience member asked Buffett how he would 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.

You can still find these texts today under a new name: the Mergent Manuals.

While resources like the Mergent Manuals are invaluable, conducting thorough research can be time-consuming and overwhelming.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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