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The Remarkable Early Years of Warren Buffett

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For most people, the “Oracle of Omaha” needs no introduction. With a self-made net worth of $84 billion, some experts consider the 87-year-old to be the greatest investor of all-time.

Despite his incredible achievements and decades in the public eye, the modest Midwesterner is frugal, relatable, and full of humility – and his life story is an endless source of lessons to aspiring business professionals around the world.

The Warren Buffett Series

Part 1: The Early Years

Today’s infographic, which is done in partnership with finder.com, is Part 1 of the Warren Buffett Series, a five-part biographical series about the legendary investor.

The Warren Buffet Series: The Early YearsInside Warren Buffett's BrainPart 3Warren Buffett's Biggest Wins and FailsBest Buffett Quotes

The Warren Buffett Series: The Early Years
Note: Stay tuned for future parts with our free mailing list.

The young Warren Buffett was clearly a special kid. He ran his first “business” when he was five years old, and he invested in his first stock when he was 11. Buffett even managed to emerge from high school richer than his teachers.

But what lessons can we learn from Buffett’s prolific childhood – and how did his experiences as a young man shape him into the magnate we know today?

From Numbers to Dollar Signs

Even for someone as gifted and focused as Buffett, a serendipitous insight played a crucial role in charting his future course.

During a visit to the New York Stock Exchange when he was 10 years old, the sight of a young man rolling custom, handmade cigars on the floor made an outsized impact on him. In particular, Buffett realized that such a job couldn’t exist without massive amounts of money flowing through the stock market.

This unexpected epiphany planted the seed for stocks in his brain, and Warren’s long fascination with numbers soon shifted towards dollars.

The Buffett Growth Mindset

Warren Buffett famously spends 80% of his day reading – and the written word was just as important to his younger self. As a lad, one book that caught Buffett’s eye was One Thousand Ways to Make $1,000 by F.C. Minaker

Specifically, the book showed Buffett how $1,000 could compound over time – and that the earlier you had money working for you, the better.

An important lesson from the book? There’s a massive difference in returns between 60 and 70 year compound interest scenarios. In other words, annualized returns are just one part of the equation – but how long the money compounds is the other crucial part. This is a big part of the reason why Warren Buffett got started early.

Warren Buffett’s First Stock

Through his various activities, Buffett had $120 saved by age 11. Naturally, he invested it in a stock, co-investing his sister’s money. They each bought three shares of Cities Service Preferred for $38.25 each.

The share price promptly dropped to $27, but Buffett waited it out. When it got to $40, he sold to net a small profit – however, the stock soon after went all the way to $202!

Warren calls this one of the most important moments in his life, and he learned three lessons:

  1. Don’t overly fixate on what he paid for the stock
  2. Don’t rush unthinkingly to grab a small profit. He could have made $492 if he was more patient
  3. He didn’t want to have responsibility for anyone else’s money unless he was sure he could succeed

These important lessons would eventually tie in well to his value investing philosophy.

Odd Jobs

The young Buffett wasn’t afraid to try new things to build up his capital. He collected golf balls, sold peanuts and popcorn, sold gum and Coca-Cola, and even created tipsheets for horse races on a typewriter.

Some of his stranger endeavors? He launched Buffett’s Approval Service and sold stamps to collectors around the country, and he also launched Buffett’s Showroom Shine – a car shining business that didn’t last too long.

Warren’s Work Ethic

By the end of high school, Buffett had launched multiple businesses, sold thousands of golf balls, read at least 100 books on business, and hawked 600,000 newspapers.

This hard work led to him having a fortune of $5,000 by high school graduation time, the equivalent of $55,000 in today’s currency. He even owned land at this point, after buying 40 acres of Nebraska farmland with his newspaper profits.

Knocked Off Course

After high school, Buffett decided he was a shoe-in for Harvard. He knew it would be stimulating for him intellectually, and that the famed business school would allow him to develop a strong network.

The only problem? He got rejected.

Instead of letting this get to him, he discovered Benjamin Graham’s book The Intelligent Investor and fell in love. It was the methodical investing framework he needed, and he would later call it the “best book about investing ever written”.

Buffett would soon be accepted at Columbia Business School, where Benjamin Graham and David Dodd taught finance. Graham became Buffett’s idol, and his second-biggest influence behind his own father.

Other Notes

Part 2 of the Warren Buffett Series will be released in early January 2018.

Credits: This infographic would not be possible without the great biographies done by Roger Lowenstein (Buffett: The Making of an American Capitalist) and Alice Schroeder (The Snowball), as well as numerous other sources cataloging Buffett’s life online.

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Investor Education

Fact Check: The Truth Behind Five ESG Myths

ESG investing continues to break fund inflow records. In this infographic, we unpack five common ESG myths.

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ESG Myths

Fact Check: The Truth Behind 5 ESG Myths

In 2021, investors continue to embrace environmental, social, and governance (ESG) investments at record levels.

In the first quarter of 2021, global ESG fund inflows outpaced the last four consecutive quarters, reaching $2 trillion. But while ESG gains rapid momentum, the CFA Institute shows that 33% of professional investors surveyed feel they have insufficient knowledge for considering ESG issues.

To help investors understand this growing trend, this infographic from MSCI helps provide a fact check on five common ESG myths.

1. “ESG Comes at the Expense of Investment Performance”

Fact Check: Not necessarily

Worldwide, ESG-focused companies have not only seen higher returns, but stronger earnings growth and dividends.

Returns by ESG RatingsEarnings Growth*Active Return**Dividends and Buybacks
Top tier2.89%1.31%0.28%
Middle tier1.35%0.12%-0.02%
Bottom tier-9.22%-1.25%-0.05%

Source: MSCI ESG Research LLC (Dec, 2020)
*Contribution of earnings growth and dividends/buybacks to active return
**Active return is the additional gain or loss compared to it respective benchmark

In fact, a separate study from the CFA Institute shows that 35% of investment professionals invest in ESG to improve their financial returns.

2. “Investors Talk About ESG But Don’t Invest In It”

Fact Check: False

Global ESG assets under management (AUM) in ETFs have grown from $6 billion in 2015 to $150 billion in 2020. In just five years, ESG AUM have accelerated 25 times.

Today, money managers are focusing on the following top five issues:

Top ESG IssuesAssets AffectedGrowth in Assets Affected (2018-2020)
Climate change / carbon emissions $4.18T39%
Anti-corruption$2.44T10%
Board issues$2.39T66%
Sustainable natural resources / agriculture$2.38T81%
Executive pay$2.22T122%

Source: US SIF Foundation (Nov, 2020)

Meanwhile, over 1,500 shareholder resolutions focused on ESG-related matters were filed between 2018-2020. Not only are investors turning to ESG assets, but they are placing higher demands on corporate responsibility.

3. “ESG Investment Strategies Eliminate Entire Sectors”

Fact Check: Not necessarily

First, not all ESG investment approaches are exclusionary.

For instance, in North America roughly 51% of ESG ETFs used an ESG integration approach as of Dec. 31, 2020. In an ESG integration approach, ESG risks and opportunities are analyzed with the goal to support long-term returns.

By comparison, values and screens approaches, which accounted for over 22% of ESG ETFs in North America may screen out specific business activities, such as alcohol or tobacco, or sectors such as oil & gas.

Percentage of ESG TypeIntegrationValues & ScreensThematicImpact
North America50.9%22.5%20.7%5.9%
Asia57.8%34.6%3.8%3.8%
Europe30.8%60.6%8.6%0.0%
Australia28.6%71.4%0.0%0.0%

Source: Refinitiv/Lipper and MSCI ESG Research LLC as of Dec 31, 2020 (MSCI Feb, 2021)

Second, companies are assessed on a sector-specific basis where ESG leaders and laggards are identified within each sector in comparison to peers. In other words, ESG doesn’t mean eliminating exposure to entire sectors. Instead, investors can choose from a range of companies based on their ESG ratings quality.

4. “ESG Investing Is Only For Millennials”

Fact Check: False

Although ESG is popular among millennials, ESG investing is being driven by the entire investor population. In 2019, one study finds that 85% of the general population expressed interest in ESG investing.

Interest in Sustainable InvestingGeneral PopulationMillennials
201985%95%
201571%84%

Source: US SIF Foundation (Nov, 2020)

Sustainable investing goes far beyond millennials—ESG disclosures are quickly becoming requirements for key industry participants, such as institutional investors and listed companies.

5. “ESG Investing is Here to Stay”

Fact Check: True

Climbing 28% in 2020 alone, over 3,000 signatories have committed to the UN Principles of Responsible Investment. As of the first quarter of 2021, 313 global organizations and 33 asset owners have been newly added.

Growth of UN PRINumber of Signatories*AUM Represented
20203,038$103.4T
20192,370$86.3T

Source: UN PRI
*As of Mar, 2020

Central to ESG’s growth is the availability of ESG investments. ESG investing has become more widely accessible—which wasn’t always the case. Over the last decade, the global number of ESG ETFs has grown from 46 to 497.

Why the Facts Matter

As ESG investments continue to play an even greater role in investor portfolios, it’s important to focus on data rather than prevailing ESG myths that are not backed by fact.

Given the recent momentum in investment returns and ESG adoption, data-driven evidence empowers investors to build more sustainable portfolios that better align with their investment objectives.

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Investor Education

ESG Investing: Finding Your Motivation

New research around ESG investing highlights that there are three common motivators for investors to invest in ESG assets.

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ESG Investing: Finding Your Motivation

Environmental, social, and governance (ESG) factors are a set of criteria that can be used to rate companies alongside traditional financial metrics.

Awareness around this practice has risen substantially in recent years, but how can investors determine if it’s a good fit for their portfolio?

To answer this question, MSCI has identified three common motivations for using ESG in one’s portfolio, which have been outlined in the graphic above.

The Three Motivators

According to this research, the three primary motivations for ESG investing are defined as ESG integration, incorporating personal values, and making a positive impact.

These goals are not mutually exclusive, though, and an investor may relate to more than just one.

#1: ESG Integration

This motivation refers to investors who believe that using ESG can improve their portfolio’s long-term results. One way this can be achieved is by investing in companies that have the strongest environmental, social, and governance practices within their industry.

These companies are referred to as “ESG leaders”, while companies at the opposite end of the scale are known as “ESG laggards”. From a social perspective, an ESG leader could be a firm that promotes diversity and inclusion, while an ESG laggard could be a company with a history of labor strikes.

To show how ESG integration may lead to better long-term results, we’ve compared the performance of the MSCI ACWI ESG Leaders Index with its standard counterpart, the MSCI ACWI Index, which represents the full opportunity set of large- and mid-cap stocks across developed and emerging markets.

ESG integration

The MSCI ACWI ESG Leaders Index targets companies that have the highest ESG rated performance in each sector of its standard counterpart. The result is an index with a smaller number of underlying companies (1,170 versus 2,982), and a relative outperformance of 7.9% over 156 months.

#2: Incorporating Personal Values

ESG investing is also a powerful tool for investors who wish to align their financial decisions with their personal values. This can be achieved through the use of negative screens, which identify and exclude companies that have exposure to specific ESG issues.

To see how this works, we’ve illustrated the differences between the MSCI World ESG Screened Index and its standard counterpart, the MSCI World Index.

ESG screening

The MSCI World ESG Screened Index excludes companies that are associated with controversial weapons, tobacco, fossil fuels, and those that are not in compliance with the UN Global Compact. The UN Global Compact is a corporate sustainability initiative that focuses on issues such as human rights and corruption.

#3: Making a Positive Impact

The third motivation for using ESG is the desire to make a positive impact through one’s investments. Also known as impact investing, this practice enables investors to merge financial gains with environmental or social progress.

Investors have a variety of tools to help them in this regard, such as the MSCI Women’s Leadership Index, which tracks companies that exhibit a commitment towards gender diversity. Green bonds, bonds that are issued to raise money for environmental projects, are another option for investors looking to drive positive change.

ESG Investing For All

With various angles to approach it from, ESG investing is likely to appeal to a majority of investors. In fact, a 2019 survey found that 84% of U.S. investors want the ability to tailor their investments to their values. Likewise, 86% of them believe that companies with strong ESG practices may be more profitable.

Results like these underscore the high demand that U.S. investors have for ESG investing—between 2018 and 2020, ESG-related assets grew 42% to reach $17 trillion, and now represent 33% of total U.S. assets under management.

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