2 reactions
Warren Buffett’s wealth was generated after he turned 60
I read in the article below that 90% of Buffett’s fortune was generated after his 60th birthday.
I’m 55 and have been investing for 30 years (almost exclusively index funds). Lately I’ve been thinking when I can “hang it up” and live off of my savings/investments.
I know the importance of time in investing (“time in” not “timing”) and Buffett’s admonitions about patience. But this really surprised me. Sounds like I should keep going.
<a rel="noreferrer nofollow noopener" href="https://finance.yahoo.com/news/janitor-vermont-amassed-8m-fortune-140000770.html" target="_blank">https://finance.yahoo.com/news/janitor-vermont-amassed-8m-fortune-140000770.html</a>
| 30,000 mlx | |
| 100 | |
| 2 |
Buffett began seriously investing when he was 10 years old. By the time he was 30, he had a net worth of $1 million, or $9.3 million adjusted for inflation.
But what if he was a more normal person, spending his teens and 20s exploring the world and finding his passion — and, by age 30, his net worth was, say, $25,000?
And let’s say he still went on to earn the extraordinary annual investment returns he’s been able to generate — 22% annually — but quit investing and retired at 60 to play golf and spend time with his grandchildren?
What would a rough estimate of his net worth be today?
Not $81 billion.
$11.9 million (99.9% less than his actual net worth).
Effectively all of Buffett’s financial success can be tied to the financial base he built in his pubescent years and the longevity he maintained in his geriatric years.
That’s how compounding works. Think of this another way: Buffett is the richest investor of all time. But he’s not actually the greatest — at least not when measured by average annual returns.
Jim Simons, founder of the hedge fund Renaissance Technologies, has compounded money at 66% annually since 1988. No one comes close to this record. As we just saw, Buffett has compounded at roughly 22% annually, a third as much.
Simons’ net worth, as I write, is around $23 billion. He is 72% less rich than Buffett.
Why the difference, if Simons is such a better investor? Because Simons did not find his investment stride until he was 50 years old. He’s had less than half as many years to compound as Buffett. Had Simons earned his 66% annual returns for the 70-year span Buffett has built his wealth, he’d be worth — please hold your breath — $63,900,781,780,748,160,000
But what if he was a more normal person, spending his teens and 20s exploring the world and finding his passion — and, by age 30, his net worth was, say, $25,000?
And let’s say he still went on to earn the extraordinary annual investment returns he’s been able to generate — 22% annually — but quit investing and retired at 60 to play golf and spend time with his grandchildren?
What would a rough estimate of his net worth be today?
Not $81 billion.
$11.9 million (99.9% less than his actual net worth).
Effectively all of Buffett’s financial success can be tied to the financial base he built in his pubescent years and the longevity he maintained in his geriatric years.
That’s how compounding works. Think of this another way: Buffett is the richest investor of all time. But he’s not actually the greatest — at least not when measured by average annual returns.
Jim Simons, founder of the hedge fund Renaissance Technologies, has compounded money at 66% annually since 1988. No one comes close to this record. As we just saw, Buffett has compounded at roughly 22% annually, a third as much.
Simons’ net worth, as I write, is around $23 billion. He is 72% less rich than Buffett.
Why the difference, if Simons is such a better investor? Because Simons did not find his investment stride until he was 50 years old. He’s had less than half as many years to compound as Buffett. Had Simons earned his 66% annual returns for the 70-year span Buffett has built his wealth, he’d be worth — please hold your breath — $63,900,781,780,748,160,000
The question is would you want to do Warren Buffets job? I’d rather have $1 million and do something interesting than $80 billion just from moving money from here to there.
Looking at him and most other fund managers, they don't even move anything that often... For the most part they work hard researching good companies, invest and then mostly do the most difficult thing in investing - do nothing and give it time :D
$82.5B of his $85B was earned after 80....But he started investing at the age of 10... A clear indication of the power of compound interest if you can leave it alone for 70 odd years :D