The Power of Compounding

on this episode of the dare is crucial I share how Warren Buffett accumulated his first 100 thousand dollars his first million and his first billion so Warren Buffett is currently worth 89 billion dollars and he's been consistently the richest person in the world for a long time now or at least he's been in the top three for a long time now how did he do this a lot of you know that Warren Buffett's secret has been compounding Albert Einstein called compounding the eighth wonder in the world and it is truly like magic the way that compounding works because over years especially if you get consistent returns on your investment let's say 10 to 15% which is what Warren Buffett has accomplished even more than that but that's not even the point if you get consistent return on your investment it will compound year after year and if you keep adding to those investments all of a sudden your investments will skyrocket and that's what we'll see later on on this episode and the purpose of this episode is to show you how Warren Buffett accumulated his net worth over 88 years he's now 88 years as I'm recording this video and he's worth 89 billion dollars so how did he do it well he started at age 11 and that's when he made his first investment and I read Warren Buffett's biography and one of the things that I noticed was his mindset from an early age he already knew that he was going to be rich he already said it he said I knew that I will be rich in my lifetime and he was always interested in money and making money and generating value and he wasn't that much interested in spending money and that hasn't changed much and there is a relationship between those things but we'll talk about that later on but think about it he was 11 years old when he made his first investment now fast forward to age 26 this is when Warren Buffett stopped working for his mentor Benjamin Graham so the investors that are watching The Listening all know Benjamin Graham the founder of value investing and Warren Buffett is also a value investor which is basically value investors invest in companies for the long term and the difference between value investing and trading or speculating is that value investors don't buy or invest in a stock only to want to sell it later on at a higher price point that's what speculators do they buy something that doesn't necessarily have underlying value like Bitcoin and they hope it will increase in price and they'll sell it later on but that is not what Warren Buffett has done or has ever done it's like well actually he has done it he admitted but he found out it wasn't for him he bought investments and hold on to them forever so by age 26 Warren Buffett had already accumulated somewhere between hundred and forty one hundred and seventy thousand dollars back then if we adjusted for inflation that's more than a million dollars right by age 26 but we have to remind ourselves warren buffett started investing at age eleven that means he already had 15 years of experience under his belt 15 years is a long time think about how long you are currently doing something having a specific job or learning a skill or maybe you are investing how long are you doing that and think about those 15 years it's a lot right if I look at myself I've been investing for about five years seriously I made my first investment when I was 18 19 years old but after that I lost money and then I I got really upset and I didn't invest for a long time but if you look at Warren Buffett he's been doing this consistently right so for a lot of people it's easy to look at it and say oh wow he was really lucky or he had a few big breaks which is obviously also the case but we also have to remember us remind ourselves 50 years of doing something consistently is a long time so by the time Warren Buffett was already wealthy he had been investing for fifteen years at a time for himself accumulated money there but he also had a job working for his mentor and he earned a salary and I think I read somewhere that it was like twelve thousand a year right but he never spent a lot of money so that's why he accumulated that much money so at age 26 in today's money Warren Buffett was a millionaire but he also had 15 years of experience in investing and he worked for one of the most important investors of all time and a man that Warren Buffett considered his mentor Benjamin Graham and to look at the significance of this the book by Benjamin Graham the value investor or the intelligent investor has been considered a classic for several decades now and Warren Buffett worked with the man every single day so this is something that we also should not forget that Warren Buffett did not only make a lot of money back then by simply investing or it sounds we are look I also make this trap right we look at these charts we look at Warren Buffett's history and we can say oh he made money by simply investing which is obviously not the case with simplifying his history right here but there are a lot of lessons that we can learn one of them is that it takes a lot of time to get good at something but also it takes a lot of time time to compound your earnings it simply you simply when you start you start from zero and that's when Warren Buffett started but the thing is you started very early at age 11 that's something that we often forget as well so these are important lessons that everybody can apply to their own life not only to that career but also to their investing strategy I myself I also believe are in the valley investing strategy which is a lot having a long-term perspective and if we look at Warren Buffett's life it has definitely paid off and we're only at age 26 right now the man already accumulated more than a million dollars in today's money but he also had the privilege of working with a man who founded a whole new investment strategy that became really successful over the years and a lot of people followed in benjamin graham's and warren buffett's footsteps now I think what happened after age 26 is almost like something that was supposed to happen because Warren Buffett was already on track here he was he started to accumulate his net worth not only in terms of money but also in terms of knowledge and building connections building a network and this is also the year when he started his old partnership and I think this is really important when we start our career or when we start working for somebody we have to be like a sponge you learn everything and and make sure that we are humble and keep on developing ourselves acquiring new skills but at some point I think everybody in their life should take ownership of their career you should either start a business or take your money invested have ownership somewhere whether that's property stocks a business it doesn't matter I think you need to take charge over your own life in your own destiny by acquiring wealth and building wealth so this these are the lessons that I learned from Warren Buffett now there's one final lesson that I want to share with you before we get to the very obvious of how he became a billionaire the early years are really important and this is something that I often found people overlook when they say great Warren Buffett became a millionaire in back in his time at age 30 he made his first million and from there on he kept on investing acquiring new businesses kept on investing the money that he made reinvested it and he got consistent returns on his investments and everything compounded and by age 55 so between 53 56 years old he made his first billion right and from there from that point on the power of compounding took care of the rest and now the man is worth almost 90 billion dollars right but what's that final lesson that I want to share him in in those early years right you need to make money and it's something that a lot of people forget they look at investors and say and say hey the investor just uses the power of compounding that's great and all but where does your money come from in the beginning so Warren Buffett had all kinds of side jobs when he was a kid he hustled for money and everything that he made he saved and then he bought stocks because he was obsessed with stocks right he worked and he worked he made money saved it bought stocks but a lot of people assume that somebody should hand you a lump of money and say oh here you go invest it or start a business but that's not how it works we all have to learn how to make money in terms of generating value happy or having a job starting a business and creating value so we can make money that's a skill right and one Buffett really perfected that skill and acquired the skill in his early years you know having all kinds of jobs making making money and then having a job working for his mentor people often people forget this as well Warren Buffett had a job right he just made $12,000 back in the time probably like maybe 50 50,000 adjusted for inflation right now but I don't know exactly what it how much it is but what matters is work make them make you money save it and then invest it right I uh and this is something that not all that I only learned from studying Warren Buffett people that I've talked to investors locally right that I know personally who have acquired a few million dollars of wealth in real estate or in stocks they all set the same thing learn how to make money and then invest it and then the power of compounding will take care of the rest so this is how Warren Buffett became a billionaire you can use the same principles to become a millionaire or even just to be wealthy and you don't have to be a millionaire to be wealthy you know you can have a few hundred thousand dollars of net worth live frugally and still be very comfortable it all depends on your goals some people want to be millionaire some people don't but what matters to me I think and I think this is something that is universal across mankind we all want to live a good life and we all have to realize that be comfortable requires a lot of work right and once we get to that point where we have accumulated the money and the skills and the network and we know how to make money this will take care of the rest so thanks for watching thanks for listening I hope you enjoyed it feel free to share or comment or subscribe to the show and until next episode like always take it hey thanks for watching this video if you enjoyed it feel free to check out some of my other videos and also don't forget to sign up to my newsletter to get two free ebooks in your inbox

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Keywords: future value, time value of money, share market, compound interest, darius foroux, Warren Buffett, power of compounding, successful investing, invest like warren buffett, intelligent investor, think like warren buffett, become investor, how to save money, how to invest like warren buffett, how to invest money, invest without money, how to invest in stocks, stock trading beginner

Id: lGPu078iXjw

Length: 13min 8sec (788 seconds)

Published: Mon Apr 29 2019