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

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

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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.

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Stocks Mentioned

IBM Stock Quote
IBM
IBM
$146.49 (0.21%) $0.31
Coca-Cola Stock Quote
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ExxonMobil Stock Quote
ExxonMobil
XOM
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