I’m doing a quick blog today because I’m spending tonight with a special lady friend; the lovely Tag.
I’ve had a lot of people disagree with me in the last few months about investing money when you still have debt. Many people would tell you that there is no guarantee in investing and that you should take the sure thing and pay off debt.
I know someone who has a different idea about investing.
The nice thing about being in debt is that you probably don’t have a lot of money. Why is that nice? Because that means you can invest in small companies that have a lot of growth potential. Here’s a quote from the world’s most famous investor, Warren Buffett:
“It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”
So congratulations non-billionaires; Warren Buffett is jealous of your financial situation.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
Well…I don’t know…when he says “not a lot of money” and then refers to $1 million dollars, it’s kinda weird.
Haha, it’s funny how different people have different perceptions. It will take me years and years to get to $1 million. Warren Buffett loses tens of millions of dollars if the stock market is down 1%.
The fact is, when you don’t have hundreds of millions, you can invest in just about any publicly traded company, which is the real point of this quote (aside from making you feel poor).
I think Warren Buffett’s ability to pick stocks is slightly better than mine…
Why doesn’t he just invest “smaller” amounts like $1 million in the companies that he wants to invest in without buying them out?
In order for jealousy to exist one person must be capable of engaging in an activity, enterprise, emotion, etc. of which another is not capable. Here’s a case in point. I’m Warren Buffet and I have an exorbitant amount of money, some might even say billions. I look at Kevin McKee and his paltry net worth and turn green with envy because Kevin has the ability to invest a small sum of money with the potential for “50%” return. But wait, a small sum of money is merely a subset of what I have, a large sum of money. So I too have the opportunity to invest this subset into a venture with the potential for a “50%” return and thus I have the ability to emulate the activities I’ve purported to be jealous of. But I don’t, because why would I invest such a small percentage of my net worth on one investment. And so I have both options available but I choose the one of the billionaire, not of the twerp, and by making this choice I’ve disproven this “jealousy” premise once and for all.
Hypothetically… I’m Warren Buffett; I have 10 hours in my day in which I can leverage my expertise to analyze a company’s financials. I can either:
a. spend 10 hours looking at small cap companies that will show rapid growth and can be purchased for a few million but will grow rapidly and have a high rate of return. These are rare and risky but since I’m warren Buffett I know what I’m looking for and I will find them.
b. spend 10 hours looking at large cap companies that I can buy billions of dollars worth of shares and get a 7% return.
Clearly one is better than the other.
His point was actually quite simple…he wishes he could have small cap style returns on large cap investments because he, as you properly alluded to, is a greedy banker just like every other finance “professional”.
While I can’t disagree with your first paragraph, I hope you didn’t truly think I believe Warren Buffett would actually prefer to have less than a million dollars.
I do, however, have to disagree with your suggestion that I alluded to Warren Buffett as a greedy banker.
I never suggested Warren Buffett is either greedy or a banker. He is not a banker at all, but an investor. I also don’t know if he’s greedy or not, because I don’t know the man personally. However, being good at something doesn’t necessarily make him greedy.
Michael Phelps already had multiple gold medals before the 2010 Olympics. Was he “greedy” in his quest to obtain eight more gold medals, or was he just trying to get the best at what he does? My guess is that Phelps was just trying to be the best swimmer. It is also very possible that Warren Buffett strives for immense gains, not because he is greedy and wants as much money as possible for himself, but because making money investing is the only way he can “be the best”.
By the way, did you know this “greedy banker” has pledged to give away 99% of his wealth to charities?
“First, my pledge: More than 99% of my wealth will go to philanthropy during my lifetime or at death.” – Warren Buffett
Great post. Warren Buffet is an all time legend, and his humble attitude adds to his popularity, as many wealthy investors are flashy. One investor and hedge fund extraordinaire that I never let be forgotten is George Soros. Soros is the 35th richest person in the world, 32 spots behind Warren Buffet, and helped the Soros Fund/Quantum Fund grow immensely in the past several decades. Both men with incredible talent and investment knowledge, Soros and Buffet are one of a kind.