Warren Buffett
BackWarren Buffett earned his first million dollars primarily through his investment partnership, Buffett Partnership Ltd., which he founded in 1956. By 1962, at the age of 32, his net worth had exceeded $1 million, largely due to the commissions generated from this venture.
Early Ventures and Investment Strategies
Buffett's journey to wealth began in his childhood. He started investing at a young age, purchasing shares of Cities Service Preferred at age 11. Although he faced initial losses, this experience taught him valuable lessons about patience and the importance of holding onto investments for long-term gains. As a teenager, he engaged in various entrepreneurial activities, including selling newspapers and operating pinball machines, which helped him understand business margins and cash flow.
Formation of Buffett Partnership Ltd.
In 1956, after working under Benjamin Graham, a renowned value investor, Buffett established Buffett Partnership Ltd. This firm operated on a unique fee structure: he charged no management fees but took 25% of profits above a 6% return. This model proved highly successful; from 1957 to 1968, the partnership achieved an average annual return of 31.6% with no negative years.
By early 1962, Buffett's partnership was valued at over $7 million, with his personal share exceeding $1 million. His investment philosophy focused on acquiring undervalued companies with strong fundamentals, a strategy influenced by Graham's teachings.
Transition to Berkshire Hathaway
In 1962, Buffett began buying shares in Berkshire Hathaway, a struggling textile company. He recognized its potential and eventually took control of the company in 1965. Although Berkshire Hathaway was initially a textile manufacturer, Buffett transformed it into a diversified holding company that would later include significant investments in various industries.
Conclusion
Warren Buffett's first million was achieved through strategic investments and the successful management of his partnership, laying the groundwork for his future as one of the world's most successful investors.