18 Sep 2014 02:12
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Warren Buffett is perhaps the greatest investor of all time, and he has a simple solution that could help an individual turn $40 into $10 million.
A few years ago, Berkshire Hathaway CEO and Chairman Warren Buffett spoke about one of his favorite companies, Coca-Cola, and how after dividends, stock splits, and patient reinvestment, someone who bought just $40 worth of the company's stock when it went public in 1919 would now have more than $5 million.
Yet in April 2012, when the board of directors proposed a stock split of the beloved soft-drink manufacturer, that figure was updated and the company noted that original $40 would now be worth $9.8 million. A little back-of-the-envelope math of the total return of Coke since May 2012 would mean that $9.8 million is now worth about $10.8 million.
The power of m-shoesbox patience
I know that $40 in 1919 is very different from $40 today. However, even after factoring for inflation, it turns out to be $540 in today's money. Put differently, would you rather have an Xbox One, or almost $11 million?
But the thing is, it isn't even as though an investment in Coca-Cola was a no-brainer at that point, or in the near century since then. Sugar prices were rising. World War I had just ended a year prior. The Great Depression happened a few years later. World War II resulted in sugar rationing. And there have been countless other things over the past 100 years that would cause someone to question whether their money should be in stocks, much less one of a consumer-goods company like Coca-Cola.