Please ensure Javascript is enabled for purposes of website accessibility

You'll Never Believe Why Warren Buffett Thinks You Can Beat His Returns

By Dan Caplinger – Feb 15, 2014 at 10:11AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Buffett might be the best investor of the century, but he still thinks you have a critical edge over him. Find out what his secret is.

Warren Buffett has put together an amazing track record at Berkshire Hathaway, with sustained long-term returns that have made his shareholders rich. Yet Buffett himself thinks that you have a big advantage over him. What is it? 

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, talks about how Buffett has said that you have a huge structural advantage not to have a lot of money to invest. As Dan points out, Buffett thinks making 50% annually on just $1 million is a lot easier than trying to come close to those returns with the billions he has to invest, because it's easier to focus on big ideas and bet big. By contrast, Buffett has had to choose big companies like ExxonMobil (XOM 0.67%)Coca-Cola (KO 0.36%), and IBM (IBM 0.21%) that definitely don'thave 50% annual return potential -- but anything smaller doesn't move the needle for his returns and runs the risk of moving the market in a small, illiquid stock. Dan concludes that it's important to use your advantages as much as you can, and having conviction to be smart with your stocks is a strategy that would make Buffett proud.

Dan Caplinger owns shares of Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway and Coca-Cola and owns shares of Coca-Cola, Berkshire Hathaway, and IBM. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

IBM Stock Quote
$146.49 (0.21%) $0.31
Coca-Cola Stock Quote
$62.48 (0.36%) $0.22
ExxonMobil Stock Quote
$110.54 (0.67%) $0.73

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.