Warren Buffett: $10,000 invested in an index fund when I bought my first stock in 1942 would be...

• Warren Buffett says that if someone invested $10,000 in an index fund back in 1942, it would be worth $51 million today.
• Since that time, Buffett says that Americans have seen 14 U.S. presidents, a world war, 9/11 and the Cuban Missile Crisis.
• The best single thing you could have done on March 11, 1942 — when I bought my first stock — was buy an index fund

Full article on cnbc

I understand some people will point out there were no index funds in 1942. The point Buffett is trying to make is long term buy and hold works fine inspite of different political parties, wars, recessions etc. And buying a diversified basket of stocks in an index fund is the best way to go about investing in the stock market.

Cheers,
Oracle.

 

I wonder if WB invested his $10,000 cash in property in March 1942, what would it be worth today?

Or, if he increased his LVR to 80% (ignoring buying expenses), what would his $50,000 of property be worth today?

 

Sure buy n hold woks..also for real estate it works.
However easier said than done.
10k was a fortune back them...
Few had that kind of money to park in an index or most other discretionary type investments.
Well before my time, but I'd imagine people were worried about much more significant things in 1942. It would have taken a substantial leap of faith yo put that kinda money on discretionary at that time.

 

According to this RBA calculator, £5,000 (roughly $10,000) in 1942 equates to roughly $365,000 in 2017.

Inflation Calculator | RBA

That is a significant amount of cash, especially for the general public but, from what I read, there would be more than a few members on PC who have this sort of funds to invest.

So, turning $365,000 into $51M without raising a sweat sounds OK to me.

I would even be happy to turn $36,500 into $5.1M

 

Historically, unleveraged shares and property have had very similar returns here in Australia. The problem is between 1942 and now property would have required so many additional out of pocket expenses in terms of maintenance and taxes that net returns would definitely be less from property.

The other point is this is aimed at no nothing investor who doesn't want hassles of dealing with property managers, tenants,etc. can just go on with their day to day life completely isolating them from their index fund investment and still end up with a small fortune.

PS: Let's try and not make it a property vs shares thread. This has been debated endlessly in other threads.

Cheers,
Oracle.

 

Life circumstances change for each person. To buy and hold for that long period of time would be quite a feat as there are times that one needs the cash I would imagine.

 

Home: Has lived in the same house since 1958. The 97-year-old five-bedroom, 2-1/2-bath home on 0.72 acres was assessed at $747,300 in 2018. (Source: Douglas County, Nebraska) ..

That's been his home base for a long time,says a lot about the mindset..

 

How much did he buy it for?

Cheers,
Oracle.

 

$10,000?

 

Just had a look in the book -The Warren Buffett Way,by Robert Hagstrom ..I have read about the purchase price..
The price was ...$31,500..

Quote 1988..
I want to be in businesses so good that even a dummy can make money..

 

That's still respectable 5.42% over 60 years. Mind you no income from property has been included since it's his PPOR. But to make like for like comparison add in 4% income (average) brings it to 9.42%

Cheers,
Oracle.

 

What Warren Buffett’s House Can Teach You About Success

 

I think a similar outcome would have achieved using property.
I don't know how much the going rate was for a house in 1942, but I know from records that in 1977 you could buy a house in Richmond Vic for 30k. That same house would now be worth approx 1.5mil.
From what I can gather typical inner city house prices in 1942 were around 4k at the time which I believe is equivalent of $1200 in 2017 money?. That house is probably worth 1.5 mil now.
So taking inflation into account I think a very similar, if not better outcome would have been achieved with property depending on where it was.

 

Dows that index fund number allow for stock replacement in the index?

 

If an index fund existed then...LOL

 

That is what an index fund does.

 

I mean do the returns take into account stocks that get kicked out?

 

Yes.

 

$10,000 in 1942 is equivalent to $159,047.74 today

What is a US dollar worth in today's money? link

According to this chap Link

The the average American’s yearly income in 1942 was $1,885 and the typical American house in 1942 cost $3,775, a new car $920, and a movie ticket 30 cents. A postage stamp set you back 3 cents, your loaf of bread ran you 9 cents, and — if your kid was smart enough — you could get him into Harvard University for $420 in tuition per year

 

He called his house “Buffett's Folly” it cost he argued, millions.

I told my wife, “I’d be glad to buy a house, but that’s like a carpenter selling his toolkit.” I didn’t want to use up my capital.

He paid $31,500.00 (which was hard on enough on him), but another $15,000.00 was spent on decorating, which almost killed him according to friends.

If the same amount was invested in Berkshire it would added $4.1b to his net worth,

He was quite happy to rent.

One of his neighbours turned out to be Donald Keough (CEO KO) there kids use to play together, so it paid off so to speak.