Invest Smart and Make A Lot of Money!
There are a lot of would’ves and could’ves in life. We’ve all experienced them. Anyone who was alive back in 1919 is probably kicking themselves after hearing the latest from Warren Buffet, who is widely regarded to be the savviest investor on the planet. In an effort to explain a few important points about investing, the Berkshire Hathaway chairman and CEO related a story about how a $40 investment at the time Coca-Cola went public could conceivably have grown to more than $10 million today. Time machines don’t exist, of course, but this is still worthwhile news to consider for investments in the future.
How Do You Turn $40 into $10 Million?
Coca-Cola went public in 1919. At the time, the company was not the household name that it’s become today. Further complicating matters was the fact that the world had just endured the first World War and was about to be thrown into some of the worst financial straits of all time. With those points in mind, it’s easy to see why so many people would’ve — and probably did — pass up the opportunity to own a piece of the Coca-Cola company.
However, if you give the matter a little thought, it’s somewhat easy to see how $40 could, in fact, grow to be worth more than $10 million. As Buffet noted, it would happen mostly through stock splits, dividends and through very patient reinvesting. It would also require a time span of nearly a century, so you’d have to be willing to sit on that money for your entire life. In fact, odds are that you wouldn’t live to enjoy the money at all. Still, being able to say that you took a measly $40 and transformed it into a true fortune would be impressive indeed.
How to Make Money According to Warren Buffet
As interesting as this little anecdote may be, the truth is that it belies a few much more important points. Buffet mostly relayed the story to drive home his two most important pieces of advice. First, when investing in something, it’s crucial to understand the relative price you are paying. Back in 1919, would $40 have been a reasonable price to pay to own a piece of Coca-Cola? After inflation, that amount is actually closer to $540. Would you be willing to part with more than $500 for several decades to eventually have millions of dollars?
The second piece of advice is to worry less about the timing of an investment and more about its overall quality. In other words, when matters far less than what. It’s not uncommon at all to hear investors pressure others to act quickly with regards to a certain stock or other asset. According to Buffet, though, what really matters is the overall quality of the investment being made. People in 1919 had no way of knowing how Coca-Cola would fare. Therefore, it would have actually been reasonable for someone to hold off on investing a decent chunk of change in the company. If they had, though, they’d be sitting very pretty right about now.
Investment Genius, Warren Buffett Explains How to Turn $40 into Millions
Watch and listen as Warren Buffett recounts how he made millions of dollars from a relatively small investment. Great advice from a smart investor. Maybe from watching the below video, you will one day become a millionaire from investing only $40!