Here's the secret to becoming wealthy - Warren Buffett

I'd like you to imagine that at that time you would invest the $10,000 and you put that money in an index fund we didn't have index funds then but but you in effect bought the S&P 500 now I would like you to think a while and don't do not change the slide here for a minute I'd like you to think about how much that $10,000 would now be worth if you just had one basic premise just like in buying a farm you buy it sold throughout your lifetime independent and you look to the output of the farm to determine whether you made a wise investment you look to the output of the apartment house to decide whether you made a wise investment if you buy an apartment small apartment I was to hold for your life and let's say instead you decided to put the $10,000 in and hold a piece of American business and never look another stock quote never listen to another person give you advice or anything on the sort I want you to think how much money you might have now and now that you've got a number in your head let's go to the next slide and we'll get the answer you'll have 51 million dollars and you wouldn't have had to do anything you wouldn't have to understand the counting he wouldn't have to look at your quotations every day like I did that first day well I had already lost $3.75 by the time I came home from school ah all you had to do was figure that America was going to do well over time that we would overcome the current difficulties and that if America did well American business would do well he didn't have to pick out winning stocks you didn't have to pick out a winning time or anything of the sort you basically just had to make one investment decision in your life and that wasn't the only time to do it I mean I could go back and pick other times that would work out even greater gains but as you listen to the questions and the answers we give the day just remember that the over the overriding question is how is American business going to do over your investing lifetime ah I would like to make one other comment because it's it's a little bit interesting let's let's say you've taken that $10,000 and you'd listen to the prophets of doom and gloom around you and and you'll get that constantly throughout your life and instead you use the $10,000 to buy gold now for your $10,000 you would have been able to buy about 300 ounces of gold and while the businesses were reinvesting in more plants and new inventions came along you would get down every year in here look in your safe deposit box and you'd have here three hours 100 ounces of gold and you could look at it and you could fondle it and you could dummy whatever you wanted to do with it but it didn't produce anything it was never going to produce anything and what would you have today you would have 300 thousands of gold just like yen in March of 1942 and it would be worth approximately a four hundred thousand dollars so if you decided to go with a non-productive asset sold instead of a productive asset which actually was earning more money and reinvesting and paying dividends and maybe purchasing start whatever it might be you would now have over 100 times the value of what you would have had with a non-productive asset in other words for every dollar you have made in American business you'd have less than a penny buy a gain by buying in the store value which people tell you to run to every time you get scared by the headlines or something the sort it's it's just remarkable to me that we have operated in this country with the greatest tail wind at our back that you can imagine it's an investor saying I mean you can't really fail at it unless you buy the wrong stock or just get excited at the wrong time but if you own the cross section of America and you put it your money and consistently over the years there's just there's no comparison against owning something that's going to produce nothing and there frankly there's no comparison with trying to jump in and out of stocks and and pay Investment Advisers if you'd followed my advice incidentally or this retrospective advice which is always so easy to give if you follow that of course you're there's one problem buddy your friendly stockbroker would have starved to death I mean you know and you could have gone to the funeral to atone for their faith but the truth is it would have been better off doing this than then a very very very high percentage of investment professionals have done or people who've done they're active that's it's very hard to move around successfully and be really what can be done with a very relaxed philosophy and you do not have to be you do not have to be you do not have to know as much about accounting or stock market terminology or whatever else it may be or what the Fed is going to do next time and whether it's going to raise three times or four times or two times none of that counts at all really in a lifetime of investing what counts is is having a a philosophy that you've that you stick with did you understand why you're in it and then you forget about doing things that you don't know how to do so

Channel: TOCE

Views: 93,762

Keywords: warren buffett, stock market, investing, trading, rich, wealthy, returns, gold, index, mutual fund, long term, compound interest, berkshire hathaway, charlie munger, S&P500, USA, US, United States, america, business, richest man in the world, one percent, 1%

Id: 66HmCyYfAkY

Length: 6min 10sec (370 seconds)

Published: Thu May 10 2018