Warren Buffett discusses EU and Monetary Union in 2011
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He’s built a $100bn (£73.4bn) fortune over the years and now he’s revealed how he did it. It’s so simple that many people will be kicking themselves for not doing it sooner.
Mr Buffett is well documented as saying “a wise man once said invest young” and that’s his number one tip that could make you rich.
And if anyone has lived by this motto it’s the man himself.
Buffett bought his first stock when he was just 11-years-old – it hardly made him any money but it was a start.
He didn’t let that deter him, learning everything he could about investing so that next time he could get it right.
How do I start investing?
It’s not easy knowing which companies to back, but Mr Buffett has also shared his advice on which types of business are likely to thrive during times of high inflation.
Buffett stressed that companies which do not need perpetual investment are most able to prosper when inflation is high.
“The best businesses during inflation are the businesses that you buy once, and then you don’t have to keep making capital investments subsequently,” he said.
“You do not face the problem of continuous reinvestment involving greater and greater dollars because of inflation.”
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One example he gave of the type of business that is able to succeed during high inflation, is the housing market.
“That’s one reason real estate, in general, is good during inflation,” Buffett said.
“If you built your own house 55 years ago, or bought it 55 years ago, like I did, it’s a one-time outlay. You get an inflationary expansion and replacement capital without having to replace it yourself.
“If you’ve got something that’s useful for someone else, it tends to be priced in terms of replacement value over time, so you really get the inflationary kick.”
However, despite his global success there are some investors who have outperformed the CEO of Berkshire Hathaway.
These successful investors have taken a different approach to Buffett, investing in riskier propositions than the American typically gets involved with.
However, Buffett has produced excellent returns over the long term with a relatively low-risk method by backing solid companies.
Companies that are likely to thrive regardless of any external factors.
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When it comes to investing there isn’t a one-size-fits-all approach, but it’s worth pointing out that those who embrace the riskier side of investing, have produced better returns than Buffett over a long period.
James Anderson is a great example of this – he has overseen Scottish Mortgage Trust since 2000, and has surpassed the returns posted by Buffett.
An investment of £100 with the investment trust 20 years ago would now be worth £2,468.80, a return on investment of a whopping 246.88 percent.
In contrast, an investment of £100 with Berkshire Hathaway would now be worth £620.40.
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