You can do better than Warren Buffet !

July 11, 2024 3 min read

Warren Buffett’s Incredible Wealth Growth

Today, let’s discuss the amazing growth of Warren Buffett’s net worth. Currently, his net worth is around $135 billion, which is 30% higher than it was about a year and a half ago. This is roughly four times his net worth from 20 years ago. The most interesting part is that a significant portion of his wealth has accumulated after he turned 50. This is a perfect example of long-term compounding in the market.

The Power of Long-Term Compounding

Warren Buffett, who is now 94 years old, had a net worth of about $620 million when he was 53. Out of his current $135 billion, he had only half a billion at the age of 52 or 53. An astounding 99% of his wealth has come in the last 40 years, after he turned 52. Moreover, around 60% to 70% of his wealth has been amassed in the last decade alone. This shows how the exponential growth curve of compounding can accelerate over time.

Understanding Exponential Growth

Many of us struggle to comprehend the power of compounding because our brains are wired to think linearly, not exponentially. Even the best minds find it hard to grasp the concept of exponential growth. For instance, ask any 50-year-old if they can imagine their wealth growing a hundred times in their lifetime, and the answer is usually no. This is because we often underestimate the impact of consistent, long-term compounding.

Buffett’s Steady Returns

Warren Buffett’s remarkable wealth is not just due to high returns. He has averaged low double-digit returns, around 10-11% CAGR, and has not significantly outperformed the market for many decades. However, the key to his success is the duration over which he has been compounding. Starting at the age of 14, he had $34 million by the age of 43 and a million dollars by the age of 30. This shows that the math behind Buffett’s wealth is applicable to everyone.

Applying the Same Principles

While we may not become Warren Buffett, the principles of compounding remain the same for all of us. Whether you start with $100,000 or $10,000, the power of compounding will work similarly. With consistent effort and time, unbelievable wealth can be created. In Buffett’s case, his net worth jumped from $34 million at 43 to $620 million at 53, a 20x increase in just ten years. Then, from $620 million to $17 billion, another 25x jump in the next twelve years.

Consistency Over High Returns

The lesson here is not to chase the highest returns but to be consistent and give your investments time to grow. Making fewer mistakes and staying close to the benchmark is often good enough. Over long periods, this strategy can yield significant wealth, just like Warren Buffett. The key is to focus on the long-term, be patient, and let the power of compounding work its magic.

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    You can do better than Warren Buffet !