You want to know how Warren Buffett more than doubled his wealth? If so, you’re at the right place.
Warren Buffett (born August 30, 1930) is an American business magnate, investor, and philanthropist, who is the chairman and CEO of Berkshire Hathaway.
Buffett has been the chairman and largest shareholder of Berkshire Hathaway since 1970. He has been referred to as the “Oracle” or “Sage” of Omaha by global media outlets.
He is considered as one of the most successful investors in the world and has a net worth of $88.9 Billion as of December 2019. He is currently the fourth richest man in the world, as of the time of writing
Buffett understands that as an investor, he needs to study the trends of the market and sit tight to them until he gets a market that sells cheap and may likely become viable in the nearest future.
That’s his stategy; to buy different sector market stocks for cheap, mostly during a market crash and sell for a high price later on when there’s a boom.
As of 2008 like every other market crash opportunity where investors have cash ready to start buying up the market, Buffett got enough cash ready and made some strategic good market purchase choices.
These choices Warren Buffett made
1. The 2008 market crash creating great investment opportunities.
A crash is a period were there is a fall in the general capitalization of stocks as businesses find it hard to turn a profit.
The market crash of 2008 is one of these periods were businesses suffered this feat.
Most of these businesses needed bail outs from either the government, banks, rich individuals or some other companies that might not have been affected by the sharp fall in market value. This becomes an open floor for great investment opportunities.
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2. Choosing the right opportunities to buy
Haha, yeah so stressful as this usually comes with a lot of work and with a lot of patience as the right timing is key.
Buffett knows this, that’s why he’s more than ready to wait patiently.
He reads a lot to gain information, so he can constantly work with such information towards getting the right buying and selling time.
3. Buying at the right time
We’re currently going through a market crisis due to the world’s COVID-19 pandemic. If we make great investment choices like Warren Buffett, we can as well double our wealth.
Here are ways it can be done;
The 2008 US market crash was mainly the housing bubble crash. The banks were lending too much money to the people who mortgaged their houses and majority of them couldn’t pay back. Eventually this lead to a total market crash.
The stock market lost over 50% of it’s value at that time.
But Warren Buffett had prepared for this moment by having saved up enough cash.
He started buying stocks in the midst of the crash and after the crash.
One of his greatest deal this time, was his $5 Billion investment in Goldman Sachs (the bank was struggling). Three years later he redeemed $3.7 Billion from his Goldman Sachs investment.
The mindset Warren Buffett used for Investing especially during the crash was simply, “Now is the great time to buy a slice of America’s future at a marked-down price”
You should note that in 2009 when stocks were selling at very cheap prizes, Buffett was buying a lot of stock.
Stocks Warren Buffett bought
There are key stocks I noticed from my studies that he bought. They include;
1. Johnson and Johnson Health care company.
This company owns and sells a range of skin care, health care, medical and pharmaceutical products around the world.
He bought the stock for the range of $50 to $60 and it now sells for about $140. This gives him about 170% return.
The stock performed incredibly well for him. And that doesn’t even include the dividends the company pays him.
2. Bank stocks
He bought some notable bank stocks like the Goldman Sachs, Wells Fargo and US bank. These were the worst hit sectors of that crash.
He bought Wells Fargo stocks for about $12 & $13 but honestly the returns he has made on these stocks aren’t overly impressive. The stock sells for around $30 and that’s because it has crashed again during this current COVID-19 crisis.
One lesson you should take from this is that this is the best time to buy stock.
There’s a basic statement about the banking sector that he made; “Banking is a good business if you don’t do dumb things on the asset side, I mean, basically”. “The banks we own earn between… 12% and 16% or so on the net tangible assets. That’s a good business, that’s a fantastic business against the long-term bond at 2%.”
Buffett has also been buying these stocks for years.
Walmart generated $510 Billion in revenue in 2019 alone. That’s way more than South Africa’s entire GDP(Gross Domestic Product).
They have made Buffett a lot of returns. They are up at about 150% since he started buying. And they are stocks that haven’t be affected since they provide essential services.
I guess you now understand, what has made Warren Buffett so wealthy. It was smart buying of viable stocks at a time when they were sold cheapest.
4. Buying Apple
Probably also one of the best purchases Buffet has made, is his buying of Apple stocks. He started buying them at the first quarter of 2016. He kept on buying since then. He made it his largest among his portfolio of income.
Apple has really been a good buy because it appreciates always, for consumers worldwide love their products. It’s a worldwide brand that’s well known for quality and customer’s satisfaction.
Buffett appreciates Apple in his speeches thus saying “It’s probably the best business I know in the world. It’s an incredible company and I should have appreciated it earlier…”
“100s of millions of people live their lives by the Apple phone, that’s some of the most valuable Real Estate in the world…. I mean this people have loads of buying power, they are able to do business or learn information or whatever it maybe through it, and it’s part of their habitual living. They spend hours a day on it and it does all kinds of things for them”
It’s fair to say that Buffet loves Apple. He focuses on buying good quality companies at cheap prices.
5. Buying Coca-Cola
One of the other best stocks he has bought, are Coca-Cola stocks making up to 10% of his portfolio.
You should notice that it’s a brand known and loved around the World. Consumers round the world have a deep love for Coke.
There are a couple of other companies that he’s invested in, such as banks, airlines, General Motors, Kraft Heinz.
Kraft Heinz ended up to be a bad buy for him but that is one bad buy in numerous good buys.
Just like every other human and entrepreneurs he learnt from that mistake on how to buy better. He isn’t reliant on one sector for him and his shareholders value. He buys in a range of sectors.
It takes a lot of waiting for these companies to sell for cheap just like in this 2020 crisis. So after the wait, it is worth it if you accumulate a lot . Just like he said— “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble…”
What comes to once’s mind after this is that the current 2020 crash has brought prices down.
Now, it’s time to do similar things that Warren Buffett did years ago by buying stocks of good, quality businesses for cheap prices.
Question; How do you plan on taking advantage of this present lockdown situation?
I’m the cofounder of WealthOnPoint. Business has always been where my interest lies. If you have any business, finance or investment related issue, feel free to contact WealthOnPoint via email [email protected]
Our team is more than happy to help you out.