How Warren Buffett Made His First $1,000,000

How Warren Buffett Made His First $1,000,000

Warren was very interested in creating his own businesses and investments from an early age. At seven years old he was motivated by a book he found in his local public library called One Thousand Ways to Make $1000. This book got him started thinking about different ways to make money as a kid, it was like a game and he loved it.

His childhood businesses included selling chewing gum, collecting glass Coca-Cola bottles to return for money, along with selling weekly magazines door to door. He also worked part-time in his grandfather’s grocery store.

During high school he delivered newspapers, sold golf balls he recovered from a local golf course, sold stamps, and washed and detailed cars. He and a friend formed one of his first business partnerships and spent $25 to buy a used pinball machine that they placed in a local barber shop. They liked the cash flow from the pinball business so much that he bought a few more of them to put in three more barber shops. His pinball machine business was later sold in less than a year for $1,200.

After being mentored by Benjamin Graham, his first investment firm as a professional was Buffett Partnership, Ltd that he created in 1956 at 26 years old.

In 1961, after his partnership was worth millions, Buffett made his first $1 million investment in a windmill manufacturing company.

By January of 1962, the Buffett Partnership had a value of over $7 million, with Buffett’s personal share being worth over $1 million. Mr. Buffett closed his Partnership in 1969, after great returns citing that he was out of good investment ideas. He became a millionaire in his late twenties and “retired” in his early thirties.

In 1962, when Warren Buffett was just 30 years old he was already a millionaire before he teamed up with Charlie Munger as his partner.

When did Warren Buffett make his first billion?

Warren Buffett’s biggest investment started when he began purchasing Berkshire Hathaway stock in 1962 after noticing a price action pattern of the stock to go up after the company closed a mill. Buffett knew that the textile business was dying in the U.S. and Berkshire’s fundamentals were never going to improve as it slowly went out of business. He was just looking for a quick investment gain as its price was so low in comparison to its liquidation value based on assets it owned.

After he was offended by a tender offer to buy his shares that was lower than a verbal agreement that was made, Buffett bought more Berkshire stock in 1964. He took control of the company through a majority of stock ownership and fired the guy that went back on the oral agreement to buy his shares at a higher agreed upon price. Buffett became the majority shareholder of a failing textile business through this incident.

He quickly pivoted the company from its traditional textile manufacturing to insurance and kept it under the same name. He would evolve Berkshire-Hathaway into a diversified holding company over time. He used the cash flow from the insurance premiums part of the business to acquire the best cash flowing businesses. He also started to build an investment portfolio for Berkshire of stocks in great publicly traded businesses that he would buy when a stock was at a good price. Berkshire Hathaway grew into a corporate conglomerate that is now the seventh biggest company in the United States by market cap.

In 1986, when Warren Buffett was 56 years old, he first became a billionaire, his wealth came from his ownership in Berkshire-Hathaway shares, as his salary with the company for being president was only $50,000 at the time.

Warren Buffett allowed Berkshire-Hathaway stock to grow in price to multiple six figures as he did not want a stock split of its Class A shares because he wanted long-term investors in his company’s stock not short-term traders and speculators. In 1996, Berkshire-Hathaway did finally do a partial stock split to create Class B shares through a Unit Investment Trust and kept the per-share value of the smaller shares close to ​130 of the original Class A share price.

How did Warren Buffet make his money?

Warren Buffett’s current net worth in 2022 is $95.5 billion in U.S. dollars making him currently the fifth richest person in the world at 91 years old.[1]

His wealth was created from investments he started as a teenager, his early investment partnership, and finally his ownership in shares of Berkshire-Hathaway that created over 99% of his total net worth over his lifetime. 99% of Warren Buffett’s net worth was created after his 50th birthday.

Warren Buffett first bought Berkshire Hathaway shares in 1962 for $7.50 a share. In 2022 Berkshire Hathaway Class A shares are trading at approximately $415,000. The Berkshire Hathaway stock annual return (CAGR) is approximately +20.26% for the past 57 years.

Warren Buffett’s wealth was built through his personal ownership of just one stock: Berkshire-Hathaway. It was his management as CEO and Chairman of his company’s cash flow into building a portfolio of companies and stocks that created one of the greatest companies of all time through acquisitions and portfolio management. Warren Buffett used Berkshire-Hathaway as an indirect wealth building machine making himself and his investors wealthy.

This shows the power of compounding growth. Berkshire-Hathaway is the only stock he owns personally. When you hear about the Warren Buffett portfolio or Buffett stocks this refers to the Berkshire-Hathaway holdings in the company’s stock portfolio.

If you are ready to start your journey to your first $1 million net worth you can check out my books The Working Dead or Investing Habits here on Amazon.

For those interested in trading the price action in the markets you can check out my books on Amazon here or my eCourses on my website here

How Warren Buffett Made His First $1,000,000
Image created by Holly Burns