Warren Buffett is more than just a big name in the investing world: he's a legend. With a net worth of around $145 billion, people are all ears when he talks about business or money matters.
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From choosing small companies to not sweating when your stocks drop, here's Buffett's advice for investing $10,000 if you want to get rich.
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First and foremost, Buffett recommends starting early when it comes to investing to take advantage of the power of compound interest. He describes the power of compound interest as like building a small snowball and letting it roll down a very long hill. As the snowball rolls down the hill, it collects more and more snow until it becomes a huge snowball.
When someone asked him at an annual shareholder meeting how they could make billions of dollars, Buffett said, “The trick is to have a very long hill, which means you either have to start very young or live… be very old. ”
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Buffett recommends investing in small businesses. Big investors – like Buffett – and funds tend to focus on larger companies, which means small company stocks will have less competition, allowing someone with $10,000 to find some hidden gems.
Still, Buffett said the only way to multiply your money is to buy into good companies by buying chunks of them – known as shares – at attractive prices.
Buffett said that if he were fresh out of college and had $10,000 to invest, he would start by looking at companies with names starting with an “A” and then move down the list, focusing on smaller companies to to find the companies he wanted. invest in.
“If you're going to do stupid things because your stocks are going down, then you shouldn't own any stocks at all,” Buffett said in an interview with CNBC. Stupid things, he clarified, are selling your shares just because the price is falling.
Buffett said it's inevitable that your stocks will fall at some point, so why worry about that? “It's about buying something you like, at a price you like, and then holding on to it for 20 years,” he said.
Buffett said you shouldn't look at your stocks day by day. “If you were to buy a farm or an apartment complex, you wouldn't get a quote for it every day, every week or every month,” he said. “So it's a terrible mistake to think of stocks as something that moves up and down and that you have to pay attention to those up and down movements.”
