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Warren Buffett: How To Turn $10,000 Into Millions (Simple Investment Strategy) - YouTube
Channel: FREENVESTING
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you can't really fail at it unless you
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buy the wrong stock
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or just get excited at the wrong time
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and i would like to just spend just a
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couple of minutes
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uh giving you a little perspective
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uh on how you might think about
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about uh investments as opposed to
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the uh tendency to focus on what's
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happening
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today or even this minute as you go
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through and
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to help me in doing that i'd like to go
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back through a little
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personal history and uh
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and we will start
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i have here
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up here in new york times of march 12
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1942 and i'm a little behind on my
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reading
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and if you go back to that time
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it
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it was about what
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just about three months um
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since we got involved in a war which
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uh we were losing at that point
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uh the newspaper headlines
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were filled with bad news
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from the pacific and i've taken just a
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couple of the headlines
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from the days preceding march 11th which
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i'll explain
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it's kind of a momentous day for me and
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so
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you can see these headlines we've got
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slide 2 up there i believe
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and uh
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we were in trouble big trouble
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in the pacific uh it was only going to
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be
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a couple months later that the
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philippines fell
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but here we were getting bad news we
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might go to slide
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three for march 9th uh
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uh i hope you can read the headlines
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anyway the price of the paper is three
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cents incidentally
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um the uh and uh
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uh let's see we've got march 10th up
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there a slide
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i'm i want to get to where there's
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advanced technology of slides
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i want to make sure i'm showing you the
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same thing that i'm seeing in front of
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me
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so anyway on march 10th
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uh when again the news was
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bad full clearing path to australia and
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it was like
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it the stock market
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had been reflecting this and i'd been
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watching
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a stock called city service
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preferred stock which had sold at 84
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dollars
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the previous year it had sold at 55
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the year before early in the in january
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two months earlier
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and now it was down to forty dollars on
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march 10th
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so that night despite these headlines
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i said to my dad i said i think i'd like
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to pull the trigger
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and i'd like you to uh
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buy me three three shares of city
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certified
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the next day and that was all i had i
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mean that was my capital accumulated
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uh uh
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over the previous five years or
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thereabouts and so my dad the next
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morning
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um bought three shares well let's take a
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look at what happened the next day let's
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go to the next slide please
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and it was not a good day
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the stock market the dow jones
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industrials broke
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100 on the downside now they were down
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2.28 as you see but that was
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the equivalent of about a 500 point drop
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now
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so i'm in school wondering what is going
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on of course
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uh incidentally you'll see on the left
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side of the chart
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the new york times put the dow jones
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industrial average
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below all the averages they calculated
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they had their own averages which have
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since disappeared but the dow jones has
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continued
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so the next day uh
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we can go to the next slide and you will
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see
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what happened the stock that was in 39
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my dad bought my stock
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right away in the morning because i'd
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asked him to my three shares
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and uh so i paid the high for the day
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that 38 and a quarter
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uh was my tick which is the high for day
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and by the end of the day
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it was down to 37 uh
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which was really kind of characteristic
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of my
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timing in stocks that was going to
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appear in future years
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uh um but
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uh uh it was on the what was then called
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the new york curb exchange then became
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the american stock exchange
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but things even though the war until the
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battle of midway looked very bad and
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if you'll turn to the next slide please
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you'll see that
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the stock did rather well you can see
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where i bought at 38 and a quarter
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and then the stock went on actually
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to eventually be called by the city
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service company
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for over 200 dollars a share
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but this is not a happy story because if
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you go to the next
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page you will see that i
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well as they always say it seemed like a
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good idea at the time you know
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uh so i sold those i made five dollars
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on it it was
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it was again typical of behavior
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but when you watch you go down to 27
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uh you know it looked pretty good to get
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that profit well what's the point of all
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this well we can leave behind the city
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service story
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and i would like you to again
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imagine yourself back on march
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11th of 1942
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and as i say things were looking bad in
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the european theater as well as what was
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going on in in the pacific but
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everybody in this country knew
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uh america was going to win the war i
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mean it
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it was you know we'd gotten blindsided
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but but
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we were we were going to win the war and
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and we knew
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that the american system had been
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working well since 1776. so
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if you'll turn to the next slide i'd
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like you to imagine
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that at that time uh you had invested
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ten thousand dollars
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and you put that money in an index fund
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we didn't have index funds then but but
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you
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in effect bought the s p 500
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now i would like you to think a while
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and don't do not change the slide here
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for a minute
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i'd like you to think about how much
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that 10 000
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would now be worth if you just had one
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basic premise just like in buying a farm
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you buy it to hold
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throughout your lifetime an independent
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and you look to the
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output of the farm to determine whether
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you made a wise investment
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you look to the output of the apartment
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house to decide whether you made a wise
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investment if you buy an apartment small
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apartment house to hold for your life
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and let's say instead you decided to put
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the ten thousand dollars in
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and hold a piece of american business
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uh and never look at another
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stock quote never listen to another
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person give you advice or anything of
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the sort
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i want you to think how much money you
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might have now
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and now that you've got a number in your
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head let's go to the next slide
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and we'll get the answer you'd have 51
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million dollars
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and you wouldn't have had to do anything
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you wouldn't have to understand
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accounting
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you wouldn't have to look at your
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quotations every day like i did that
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first day
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i'd already lost 3.75 by the time i
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came home from school uh all you had to
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do
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was figure that america was going to do
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well over time that we would
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overcome the current difficulties
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and that if america did well american
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business would do
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well you didn't have to pick out winning
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stocks
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you didn't have to pick out a winning
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time or anything of the sort
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you basically just had to make one
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investment decision
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in your life and that wasn't the only
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time to do it i mean i could go back and
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pick other times that
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uh would work out even greater gains but
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as you listen to the
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questions and answers we give today
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just remember that the over the
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overriding question
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is how is american business going to do
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over your investing lifetime uh
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i would like to make one other comment
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because it's
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it's a little bit interesting let's
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let's say you're taking that ten
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thousand dollars
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and you listen to the profits of doom
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and gloom around you and
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and you'll get that constantly
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throughout your life
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and instead you use the ten thousand
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dollars
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to buy gold now for your ten thousand
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dollars
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you would have been able to buy about
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300 ounces of gold
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and while the businesses were
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reinvesting
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uh in more plants and new inventions
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came along
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you would go down every year into your
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look in your safe deposit box
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and you'd have your three ounce 100
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ounces of gold and you could look at it
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and you could fondle it and you could i
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mean whatever you wanted to do with it
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but it didn't produce anything it was
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never going to produce anything
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and what would you have today you would
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have
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300 ounces of gold just like you had in
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march of 1942
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and it would be worth approximately
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four hundred thousand dollars
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so if you decided to go with a
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non-productive asset goal
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instead of a productive asset which
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actually was
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earning more money and reinvesting and
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paying dividends and maybe purchasing
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stock whatever it might be
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you would now have over 100 times
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uh the value of what you would have had
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with a non-productive asset in other
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words for every
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dollar you have made in american
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business you'd have less than a penny
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by of gain by buying in the store value
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which people tell you to run to every
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time you get scared by the headlines or
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something disorder it's
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it's just remarkable uh to me that
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we have operated in this country with
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the greatest tailwind at our back
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that you can imagine it's an investor's
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i mean you can't really
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fail at it unless you buy the wrong
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stock
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or just get excited at the wrong time
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but if you if you owned a cross-section
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of america and you put your money in
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consistently over the years
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there's just there's no comparison
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against owning something that's going to
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produce nothing and there frankly
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there's no comparison
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with trying to jump in and out of stocks
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and
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and pay investment advisors if you'd
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followed my advice incidentally
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or this retrospective advice which is
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always so easy to give
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uh if you'd follow that of course you're
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there's one problem buddy
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your your friendly stock broker would
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have starved to death
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i mean you know and you could have gone
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to the funeral
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to atone for their fate but the truth is
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you would have been better off doing
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this than
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than a very very very high percentage
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of investment professionals have done or
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people have done that are active that
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it's it's very hard to move around
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successfully
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and beat really what can be done uh
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with a very relaxed philosophy and you
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do not have to be
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you do not have to be you do not have to
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know as much about
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accounting or stock market terminology
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or whatever else it may be
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or what the fed is going to do next time
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and whether it's going to raise rates
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three times or four times or two times
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none of that counts at all really in a
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lifetime of investing what what counts
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is
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is having a a philosophy that you've
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that you stick with that you understand
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why you're in it and then you forget
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about doing things that you don't know
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how to do
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