Warren Buffett breaks down how he would invest if he had to start again with $1 million
TLDRIn a 2018 interview, Warren Buffett was asked how he would invest if he had to start again with $1 million. He responded that he would delve into extensive research, similar to flipping through 20,000 pages of Moody's manual. Buffett shared his early experiences of meticulously studying railroad companies, including the lesser-known Green Bay and Western, which led to his first significant investment insights. He emphasized the importance of being passionate about the subject matter, not just the money, and finding what one loves to do. He suggested that with a deep knowledge of small, undervalued securities, one could potentially achieve a 50% annual return. Buffett's approach is rooted in a love for the investment game itself, akin to how a biologist or chess player is driven by the thrill of discovery within their field.
Takeaways
- 📚 Warren Buffett emphasizes the importance of thorough research, mentioning that he would go through extensive manuals like Moody's to find investment opportunities.
- 🚂 He specifically recalls his detailed study of railroad companies, including the Green Bay and Western railroad, highlighting his methodical approach to understanding each company's financials.
- 🔍 Buffett suggests that finding undervalued securities is akin to a biologist's search for knowledge, indicating a deep passion and interest in the subject matter is crucial for success.
- 💡 He mentions that with a small amount of capital like $1 million, it's possible to achieve a 50% annual return by being deeply involved and knowledgeable about small companies.
- 🤝 Buffett's detailed knowledge of lesser-known companies impressed Charlie Munger, leading to a strong connection between the two, underlining the value of comprehensive understanding.
- 🧠 He acknowledges the complexity of the human brain and suggests that individuals excel when they identify and capitalize on their unique strengths and interests.
- 🌟 Buffett's success is attributed to his love for the game of investing, not just the money, which he believes is essential for anyone looking to excel in the field.
- 🔑 He implies that opportunity cost plays a significant role in investment decisions, as it helps arbitrate between different methods of finding undervalued assets.
- 🚀 Buffett's approach involves a combination of deep research and a keen eye for great companies at a fair price, a strategy he believes can yield high returns.
- 🎯 He stresses the necessity of being in love with the subject matter, comparing it to how people are passionate about their hobbies or fields of expertise.
- 📈 Finally, Buffett encourages continuous learning and adaptation, suggesting that the equivalent of Moody's manuals in the present day would be his starting point for research.
Q & A
What annual return does Warren Buffett claim he could achieve if he started again with under $1 million?
-Warren Buffett claims he could achieve a 50% annual return if he had to start again with under $1 million.
What method did Warren Buffett use to find investment opportunities when he was younger?
-Buffett used to go through the Moody's Transportation manual, which was around 1500 pages, to find interesting investment opportunities, such as the Green Bay and Western railroad company.
What is the nickname of the Green Bay and Western railroad company that Buffett mentioned?
-The Green Bay and Western railroad company was known as 'Grab Baggage and Walk' or 'GBNW'.
How did Buffett's knowledge of small companies impress Charlie Munger when they first met?
-Buffett's detailed knowledge of small companies on the west coast, which Munger thought he wouldn't have heard of, impressed Munger and became an instant point of connection between them.
What does Buffett suggest is necessary to achieve a high return on investment with a small amount of money?
-Buffett suggests that to achieve a high return on investment with a small amount of money, one must be in love with the subject, not just the money, and be passionate about finding undervalued securities.
What is Buffett's approach to investing if he had to start again with a small amount of money?
-Buffett would try to know everything about everything small, find something with potential, and use opportunity cost as the final arbitrator of which method to use.
Why does Buffett emphasize the importance of loving the subject of investment rather than just the money?
-Buffett emphasizes this because passion and interest in the subject matter drive a deeper understanding and more effective search for undervalued securities, which is key to successful investing.
What does Buffett compare the process of finding undervalued securities to?
-Buffett compares it to how a biologist or a chess player is excited to expand their knowledge in their respective fields.
What does Buffett believe about the human brain's ability to perform its best?
-Buffett believes that the human brain does its best when a person finds out what they are really suited for and then focuses intensely on that area.
How does Buffett describe the potential of investing in undervalued securities with a small amount of capital?
-Buffett describes it as a game that one can play to earn a significant return, like earning 50% a year, if they are truly interested and passionate about it.
What does Buffett suggest for someone who wants to invest successfully in the stock market?
-Buffett suggests that one should immerse themselves in the subject, learn as much as possible about small companies, and find undervalued securities with a genuine interest and passion for the process.
Outlines
💼 Investment Strategy for High Returns
The speaker discusses their confidence in achieving a 50% annual return if starting with under $1 million. They reminisce about their past experience of meticulously going through the Moody's Transportation manual, which led to the discovery of undervalued assets like the Green Bay and Western railroad company. The speaker emphasizes the importance of a deep, passionate knowledge of the subject matter and the joy of finding undervalued securities as key to this investment strategy. They suggest that with a small amount of money and a love for the investment game, one could potentially earn such high returns.
🤝 Welcoming Enthusiastic Investors
The speaker expresses appreciation for the attendees of the annual meeting, acknowledging that those who come have a keen interest beyond mere games like Bridge or chess. They encourage the audience to continue their engagement and to return the following year, highlighting the value of community and shared interests in investment and financial success.
Mindmap
Keywords
💡Annual Return
💡Moody's Manual
💡Green Bay and Western Railroad
💡Undervalued Securities
💡Opportunity Cost
💡Investing Opportunity
💡Love for the Subject
💡Knowledge Expansion
💡Human Brain
💡Playing the Game
💡Annual Meeting
Highlights
Warren Buffett guarantees a 50% annual return if starting again with under $1 million.
Buffett would use a method involving extensive research, similar to flipping through 20,000 pages of Moody's manual.
He discovered interesting insights by going through the Moody Transportation manual as a young investor.
Buffett's detailed knowledge of small companies impressed Charlie Munger.
Investing success requires a deep love for the subject, not just the money.
Buffett emphasizes the importance of expanding knowledge in a given area.
He suggests that the human brain performs best when doing what it is most suited for.
Buffett believes in the power of finding undervalued securities for high returns.
Investing with a small amount of money requires a passion for the game.
Buffett's early success was due to his deep dive into the details of small, lesser-known companies.
He discovered unique investment opportunities by understanding the quirks of individual companies.
Buffett's approach to investing is akin to a biologist's quest for discovery in their field.
He compares the excitement of investing to that of playing a game like Bridge or Chess.
Buffett suggests that the modern equivalent of Moody's manuals would be a key resource for a new investor.
He believes that with $1 million, it's possible to earn a 50% return per year with the right approach.
Buffett's investment strategy involves a combination of thorough research and opportunity cost analysis.
He encourages attendees to continue their interest in investing and to return to the annual meeting next year.
