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Warren Buffett is perhaps the greatest investor of all time, and he has a simple solution that could help an individual turn $40 into $10 million.
Buffett is the CEO and Chairman of Berkshire Hathaway. With a net worth of around $US70 billion, Buffett is widely acknowledged as the world’s greatest investor.
Coca-Cola is one of Buffett’s favourite companies, and not just because it’s his soft drink of choice. After dividends, stock splits, and patient reinvestment, someone who bought just $40 worth of Coca-Cola’s stock when it went public in 1919 would now have more than $10 million.
The power of patience
I know that $40 in 1919 is very different from $40 today. However, even after factoring for inflation, it turns out to be $540 in today’s money. Put differently, would you rather have an iPhone, or over $10 million?
But the thing is, it isn’t even as though an investment in Coca-Cola was a no-brainer at that point, or in the near century since then. Sugar prices were rising. World War I had just ended a year prior. The Great Depression happened a few years later. World War II resulted in sugar rationing. And there have been countless other things over the past 100 years that would cause someone to question whether their money should be in stocks, much less one of a consumer-goods company like Coca-Cola.
The dangers of timing
Yet as Buffett has noted continually, it’s terribly dangerous to attempt to time the market:
“With a wonderful business, you can figure out what will happen; you can’t figure out when it will happen. You don’t want to focus on when, you want to focus on what. If you’re right about what, you don’t have to worry about when.”
Forget about when to buy shares, focus on what shares to buy. And when you find the right company, buy it immediately. The right time to buy a great company is always today.
Investing for the long term
Investing is not like placing a bet on number 32 on the roulette wheel. Instead it’s buying a tangible piece of a business.
It is absolutely important to understand the relative price you are paying for that business, but what isn’t important is attempting to understand whether you’re buying in at the “right time,” as that is so often just an arbitrary imagination.
In Buffett’s own words, “if you’re right about the business, you’ll make a lot of money,” so don’t bother about attempting to buy stocks based on how their stock charts have looked over the past 200 days. Instead always remember that “it’s far better to buy a wonderful company at a fair price.”
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