Speaker 1: Warren Buffett is well known for turning small amounts of money into a ridiculously large ones. He bought a stock of Berkshire Hathaway in 1965 and through the power of investing, it grew into one of the biggest stocks in the world. And this video, I want to show you a clip of Warren Buffett explaining how you, a regular person, could have turned one hundred fourteen dollars into four hundred thousand through the power of smart investing.
Speaker 2: So I want to ask a little bit about some of the new investing things going on in the markets. And Greg Wandera from Bakersfield wonders about target date funds. And I wanted to also ask about all the new index funds with a brain. Are those things really adding value? No, probably not. The the S&P 500 index fund is the one to use. That’s the one I use in that bet I made for 10 years. It’s the one I’ve told the trustee for my wife to put 90 percent of the funds I lever into that. The S&P 500 is I don’t know whether it’s 80 percent of the market value of, you know, of everything you can buy in this country. And it’s over. I think it’s over 20 trillion and you’re buying America. And let me give you a figure that’ll blow your mind. I think I bought my first stock when I was 11 years old. It was the first quarter of nineteen forty two shortly after Pearl Harbor. I spent one hundred and fourteen dollars and seventy five cents, three shares, one hundred fourteen seventy five, if I put that one 14 into the S&P 500 at that time and reinvested the dividends. Think of a figure to what it would be worth today. Oh, man. Well, it’s OK. I just want your audience to think for a second the answer. The answer is about four hundred thousand dollars. So if I was a little kid, I’d tell you that hundred and fourteen bucks, I’d say four hundred thousand dollars today. One person’s lifetime. That’s America. And that isn’t me. You know, it’s it is the huge tailwind the American economy gives to any equity investor. Now, the market’s gone down many times during that time. People are panicked. During that time. Headlines have been terrible. You know, look like we were losing the war one first one. But America is a powerful economic machine that since 1776 has worked. It’s going to keep working. Now, you don’t want to buy to hold for a year. You don’t want to buy with the idea that you can sell it in two years or three years, necessarily make money. You could lose money that way. But if you buy it for 10, 20, just keep buying the S&P 500 index and forget about all the other nonsense that’s being sold. Because I’ll guarantee you one thing about the stock being sold to you. It will carry bigger fees. And I’m talking about. Yeah, and there’s no reason to think that you’re not you don’t know if it’s four hundred thousand, but that same sort of process or returns won’t happen. Starting right now, the S&P 500 companies have earned well over 10 percent on equity, often 15 percent annually for years and years and years and years. I’ve done it with Democratic administrations, with Republican administrations. Now you get money compounding at that kind of rate underlying your investment and you get a diversified group of that. But you’re going to do well.
Speaker 1: And that’s the great thing about investing. Anyone can do it. You don’t have to be an economic genius to do so as long as you follow simple strategies and invest in the right places. As Buffett outlines, there’s a lot of money to be made. I’ll let Warren Buffett explain things in a bit more detail.
Speaker 3: Thank you. I’m a physician from St. Louis and I want to thank you and everyone here because I’m one of these doctors that really doesn’t know anything about money or finance. The money comes in, but I don’t know what to do with it. I’m not able to really evaluate the financial strength of a company, but I can evaluate the ethical strength of the company. And that’s why I feel real comfortable. I think most of us here having our savings in first year. Hathaway and the. Thank you. This question has probably been asked in different ways already, but several years ago, a fellow I know who was had been manager of Magellan Fund warned that we were going to have a terrible decade or so in the stock market because of all the things people have brought up so far. The increasing interest rates and runaway spending and decreasing dollar and stagflation may be right around the corner. Social Security problems. And even what Charlie Munger referred to is that most of our best and brightest graduates, I find, are going into money management rather than they’re not becoming doctors or molecular biologists or PhDs in chemical engineering. And so in view of the fact that a year or two ago, people there were still in a billionth of emotion about the stock market going up and making everyone rich just by having their money in the stock market, it seems like they had a booleans has dropped in. And I’m hearing in anticipation of a bear market and you wrote, I think several years ago that it’s hard to make money in a bull market and the real opportunities come in a bear market. So I’m wondering if you would give us a clue as to what your strategies are going to be if it’s really true that the market gets dismal over the next few years?
Speaker 4: Well, if the market gets cheaper, we will have many more opportunities to do intelligent things with money. Now, whether we will have a blow on the money in the meantime or something of that is another question. But but, you know, we are going to be buying things one thing or another, operating businesses, stocks, high yield bonds, whatever. We’re going to be buying things for as long as I live just as long, just like I’m going to be buying groceries longer than that. Yeah, well. Yeah, Charlie is just waiting to take over after I here, and I’m going to be buying groceries for the rest of my life now, would I rather have grocery prices go up or down if I’m going to be buying groceries tomorrow and next week and next month, the next year?
The answer is, obviously, if I’m a net buyer, I’m I would I will do better. If prices are lower. We have no we’re not good at forecasting markets. I mean. Knew that we were getting enormous bargains in the mid 70s. We knew that the market went crazy to some extent in the in the late 90s. But we don’t have much we don’t spend any time, Charlie. I spend no time thinking or talking about what the stock market is going to do, because we don’t know. We do know sometimes that we’re getting very good value for our money when we buy some some stocks, some bonds, as it may be. But we are not operating on the basis of any kind of macro forecasts about stocks. And there’s always a list of reasons you gave a. There’s always a list of reasons why the country will have problems tomorrow and there but there’s always a list of opportunities which don’t get mentioned quite as often. So we don’t sit out to make a list of the bad things that are happening in the economy and the good things that are happening and therefore expecting the stock market. It might not it doesn’t behave that way, even if you if you could correctly forecast some of the bad things are good things. Overall, I’m an enormous bull on the country. I mean, over time, I mean, this is the most remarkable success story in the history of the world, if you think about it. I mean, in 1790, we had less than four million people in this country where there were 290 million people in China, there were 100 million people in Europe, you know, and they all had the same intellect we had there in the same general climate. They had lots of natural resources. And two hundred and fifteen years later, that those three point nine million people, I think actually, you know, have three million people. I think actually, you know, I have 30 percent or so of the world’s GDP. So it does not make sense to bet against America. That doesn’t mean all our policies are smart or anything. But I would not I do not get pessimistic on the country. You know, I worry about the I mean, the big the big worry is, is what can be done by either terrorists or government governments that have access to nuclear, chemical or biological weapons. But but in terms of the basic economics of the country, your children are going to live better than you live in your grandchildren. They’re going to live better than than your children live.
Speaker 1: So the first thing that Buffa addresses is everyone’s issues that they have with the market. Remember, this interview was conducted in 2005 and people were worried because a bear market might come and interest rates were difference. Buffett says if you want to be a good investor, you actually need to embrace bear markets because bear markets essentially means stocks have gotten cheaper. And that’s when you want to buy. It’s the same with a car. If a car was half price, people would be all over it. But when it comes to the stock market, they behave in the opposite way, the wrong way. So that’s one thing you need to always remember. If you want to compound money and grow into large amounts, keep investing even in a bear market, then the question becomes where should we invest? And I think Warren Buffett was pretty clear in his views here. America has made millions and millions of people rich. In 1790, it had three point nine million people and just over 200 years later, it was producing 30 per cent of the world’s entire GDP. America is powerful. America is the money capital of the world.
You know, as Buffett said, if you invested one hundred fourteen dollars into America in 1942 through the S&P 500 today, it will be worth over four hundred thousand dollars. It’s the same with the future. If you want to turn small amounts of money into large amounts, invest in America over the long term. That’s what Buffett thinks anyway.