Warren Buffett once explained how he'd turn $10,000 into a huge fortune if he were a new investor — here are his 3 simple strategies

Buffett's advice on turning $10,000 to $30 Billion

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Berkshire Hathaway’s annual meetings give shareholders the opportunity to pick CEO Warren Buffett’s brain on a wide range of topics.

However, one investor who attended the conference in 1999 cut right to the chase. “Mr. Buffett, how do I make $30 billion?” he asked.

As always, the Oracle of Omaha conveyed complicated theories in simple terms. Here are the three crucial rules that helped the 93-year-old accumulate a massive fortune and could help ordinary investors too.

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Start young

Buffett’s best advice for investors is to get started as early as possible. He has a simple metaphor to explain his wealth-building strategy. “We started with a little snowball on top of a very tall hill,” he said. “We started at a very early age in rolling the snowball down, and of course, the nature of compound interest is that it behaves like a snowball.”

Indeed, the length of Buffett’s career is a key piece of his enormous wealth. He bought his first stock at the age of 11. He’s now 93 years old and still actively investing. In fact, the majority of Buffett’s wealth was accumulated after he turned 65. In 1999, his net worth was just $30 billion. Today, it’s nearly four times greater at $116 billion, as per Bloomberg.

Staying invested over a long period of time is crucial. Ordinary investors can best harness the power of compounding by starting as early as possible. A great way to get a foothold on your investing strategy is with Acorns*, an automated savings and investment app that makes your spare change go to work for you.

When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess into a smart investment portfolio*. This way, even the most essential spending translates to money saved for the future.

If you’re looking to build an emergency savings fund, a high yield savings account is the place to begin.

We’ve compiled a list of the Best High-Yield Savings Accounts of 2023 so you can have a streamlined look at what high-yield savings account is best for your savings to grow over time.

Circle of competency

Tom Watson Sr., the founder of IBM (NYSE:IBM), once said, “I’m no genius. I’m smart in spots — but I stay around those spots.” That’s the mantra Buffett has applied to his investing too.

Investing is risky, and Buffett has mitigated that risk by sticking to industries he understands. Much of his portfolio is focused on either simple consumer businesses or financial companies.

Ordinary investors can similarly reduce risk by avoiding stocks in businesses that are too complex to analyze and evaluate. Stick to your circle of competency and don’t speculate.

If you want to expand your circle of competency, you may want to seek advice from a trusted professional. Finding a financial advisor that suits your specific needs and financial goals is simple with WiserAdvisor*.

WiserAdvisor’s online platform connects its users to vetted, registered financial advisors after answering some simple questions. WiserAdvisor will connect you with 2-3 personalized matches* that you can read up on and even have an obligation-free phone call with to determine if they’re the right fit for your financial goals.

Read more: Owning real estate for passive income is one of the biggest myths in investing — but here's how you can actually make it work

Search for small companies

Buffett said that if he were starting again today with $10,000, he would focus first on small businesses. “I probably would be focusing on smaller companies because I would be working with smaller sums, and there’s more chance that something is overlooked in that arena,” he said at the shareholder meeting.

In his early days, the billionaire investor focused on extremely small companies that would be considered small-caps. He bought a tiny furniture company in Nebraska in 1983 when it was still expanding across state lines. He acquired See’s Candies when it made just $4 million in annual profits in 1972.

These small businesses were overlooked and had more room to grow. That means Buffett had a chance to buy them cheap and watch them expand. This is also true in 2023. Small-cap stocks are roughly 30% cheaper than large-cap ones at the start of the final quarter of 2023, according to analysis by BNP Paribas. They have also historically outperformed large caps, especially after recessions and over longer periods of time, says MSCI. It’s advisable to diversify your portfolio and add some small caps to your watch list.

With Robinhood’s* investing app, you can start investing in small businesses yourself. Robinhood allows you to buy fractional shares of an investment and doesn’t charge a commission to trade stocks.

With features like automatic investing, in-app investing guides and 24/7 access to their customer service team, Robinhood makes it easy to diversify* your portfolio with stocks whose earning potential might grow over time, all the while guiding you on what are the best money moves to make.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.