Online Stock Trading

Now let’s recount the reason we, or I if you don’t want to eat my words with me, have to try to analyze the man’s success under lesser lights. As mentioned before, by the lowest estimate, Buffett turned 610 thousand into 148 billion. My prior differentiation suggests that I don’t have $610,000 but at the same time, having my roots were they were, I don’t really need $148 billion either. So let’s pretend I’d be happy with a nice round million. If we take his yield as our yardstick (and I always will be from this point forward), but ignore his initial investment (which necessarily makes us ignore his ending amount), we can get that million with a mere $4.12:

Of course, while I’m optimistic now because I can summon the initial investment, I’m terrified that I might be dead before I get there.

So this demonstration brings to light the extremities involved with my little Buffett discussion: if given enough money to begin with, and after having solid returns for a very long time, we could equally end up with a tremendous amount of assets, but given the fact that we may not even really need that many assets, we might settle for beginning with much less, but then it would still take a very long time. Let’s look at some other variations.

What if we started of with, say, $200?

If we did, we could end up with 48 million—but remember we don’t want to die first, so how long until we reach that million now?

That’s better, but gosh, being thirty-five years on this side of that equation almost feels as bad as being fifty-one years on this side. (If you want to play around with these four variations of the compounding formulas, you may download the spreadsheet here).

So now the problem is really two-fold: starting with a relatively small initial investment and getting it to become a big one in a relatively short period of time. So this is the game we’re going to have to play. If we can’t control (or again, if I must speak for myself here—I) what we have at our disposal, and don’t really care for thinking we’re big once we’re old, then we have to start small and get where we’re going sooner. But because the prospects of Buffett’s returns are so amazing (because of what they are as much as because they’re real history) we’ll be using his returns as our yardstick but we’ll neglect to call the fifty-one years “years” and insist on just calling them units (or if you having something with a bit more flare, I’m open to suggestions). Every time we pass a Buffett milestone, we’ll know we did what he did in a year—so let’s hope we can pass those milestones more quickly.