Warren Buffett Reveals How To Invest $10,000 If You Want To Get Rich
Warren Buffett is a big name in the investing world. With a net worth of $114.2 billion, people are all ears when he’s speaking. From picking small companies to not sweating it when your stock drops, here’s Buffett’s advice for investing $10,000 if you want to get rich.
Check Out: Avoid Buying These High-End Electronics That Could Break Down in 5 Years
Learn More: 6 Genius Things All Wealthy People Do With Their Money
Get Started Early
First and foremost, Buffett recommends getting started early when it comes to investing to take advantage of the power of compound interest. He describes the power of compound interest as building a little snowball and rolling it down a very long hill. As the snowball rolls down the hill, it collects more and more snow until it becomes a huge snowball.
At an annual shareholders’ meeting, when someone asked him how they could make billions of dollars, Buffett said, “The trick is to have a very long hill, which means either starting very young or living… to be very old.”
Learn About: Here Are 5 Stocks I Won’t Sell
Invest in Small Companies
Buffett recommends investing in small companies. Large investors — like Buffett — and funds tend to place focus on larger companies, which means small business stocks will have less competition, allowing someone with $10,000 to find some hidden gems.
Nevertheless, Buffett said the only way to multiply your money is to buy into good businesses by buying pieces of them — aka stocks — at attractive prices.
Buffett said if he was just getting out of school and had $10,000 to invest, he’d begin by looking at companies that have names that start with “A” and continue down the list, focusing on smaller companies to find the ones he wanted to invest in.
Don’t Worry About Your Stock Going Down
“If you’re going to do dumb things because your stock goes down, then you shouldn’t own stock at all,” said Buffett in an interview with CNBC. Dumb things, he clarified, are selling your stock just because the price goes down.
Buffett said that it’s inevitable that your stock will go down sometime, so why worry about it. “The point is to buy something you like, at a price you like, and then hold it for 20 years,” he said.
Buffett said you shouldn’t look at your stocks day to day. “If you bought a farm or an apartment house, you wouldn’t get a quote on it every day or every week or every month,” he said. “So it’s a terrible mistake to think of stocks as something that bob up and down and that you should pay attention to those bobs up and down.”
Additional Expert Advice for Investing $10,000 To Get Rich
Robert R. Johnson, Ph.D., CFA, CAIA, professor of finance at Heider College of Business, Creighton University, said, “The best investment strategy for most investors is to Keep it Simple, Stupid (KISS). People should invest in a low-fee, diversified equity index fund and continue to invest consistently whether the market is up, down or sideways.
“Dollar-cost averaging into an index mutual fund or ETF is a terrific lifelong strategy. Dollar-cost averaging is a simple technique that entails investing a fixed amount of money in the same fund or stock at regular intervals over a long period of time. For the vast majority of investors, the KISS mantra — keep it simple, stupid — should guide their investment philosophy.”
Regarding Buffett, Johnson said, “Warren Buffett has created an empire by investing in boring, staid enterprises like See’s Candies, Dairy Queen and Nebraska Furniture Mart. These may not be sexy companies, but they perform well…
“Consistency and patience are the virtues associated with accumulating wealth over the long run. Jeff Bezos once asked Warren Buffett: ‘You are the second richest man in the world and yet you have the simplest investment thesis. How come others didn’t follow this?’ To which Warren Buffett responded: ‘Because no one wants to get rich slowly.’ What Buffett is referring to here is his philosophy of investing in good companies and staying invested for the long-run, letting compounding work its magic.”
More From GOBankingRates
I'm a Shopping Expert: 9 Items I'd Never Put in My Grocery Cart
Avoid This Simple Banking Mistake That Could Cost You Over $1,000
6 Things You Should Never Do With Your Tax Refund (Do This Instead)
This article originally appeared on GOBankingRates.com: Warren Buffett Reveals How To Invest $10,000 If You Want To Get Rich
