Here’s Warren Buffett’s Investing Secret That Has Nothing To Do With Stock Picks
March 19, 2025
The S&P 500 gained 36,974% between 1965 and 2025. That’s not too shabby for a 60-year stretch — unless you compare it to the success of a prophetic life-long investor like Warren Buffett.
“The Oracle of Omaha’s” Berkshire Hathaway firm gained an astronomical amount over the same period as its compound annual growth rate (CAGR) was 19.9%, significantly outperforming the S&P 500’s 10.35% CAGR.
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To put this into a perspective, if you had invested $100 in the S&P 500 at the beginning of 1965 and reinvested all dividends, by the end of 2025, you would have approximately $37,073.91. With that in mind, it’s easier to comprehend Berkshire Hathaway’s astronomical profits.
However, Buffett started putting his money to work long before 1965, and that — even more than his legendary aptitude for picking winners — is the secret to his success. Let’s take a closer look at how utilizing time and compounding interest are more consequential than returns.
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The Myth of Buffett’s Late-Life Success
Buffett amassed a large percentage of his fortune after he turned 50, and now at age 94, he has accrued an estimated net worth of $163 billion. In 2020, when Buffett was worth just $81 billion, CNBC reported that $70 billion came after he qualified for Social Security, which means Buffett gained billions more between his mid-60s and today.
Those facts have created a widely accepted but false narrative that Buffett started investing well into middle age, which gives procrastinators room for optimism. If they could become excellent investors like Buffett, they could afford to get a late start, too.
Buffett’s stock market prowess is only part of the story. His greatest strength is the same as that of every investor — compounding and the time it needs to reach its true potential.
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The ‘Oracle’ Is Proof That There’s No Substitute for an Early Jump
Buffett was born in Omaha, Nebraska, in 1930 and quickly displayed a penchant for wealth generation as he sold chewing gum and Coca-Cola in his neighborhood when he was 6 and later delivered newspapers.
He was hardly the only kid hustling for pennies during the Depression, but at 11 years old in 1942, he launched a lifelong love of investing when he bought his first stock — three shares of an oil company called Cities Service at about $38 each.
According to CNBC, he sold the shares soon after for $40 each. After celebrating his $6 profit, the young Buffett watched helplessly as Cities Services climbed to $200 per share.
It was the hardest but most valuable lesson of his career: The key to investing success is to compound gains by buying and holding for the long term.
Buffett said, “The money is made in investments by investing and by owning good companies for long periods of time. If they buy good companies, buy them over time, they’re going to do fine 10, 20, 30 years from now.”
What If Buffett Had Been a Typical Investor With Oracle-Level Returns?
Buffett founded Berkshire Hathaway in 1965, but he made his first million by the time he turned 30 five years earlier in 1960 — that’s $10.33 million in today’s money.
Far from starting to grow wealth at 50, Buffett was rich by any reasonable standard in his late 20s. He went from rich to filthy rich by holding those investments and adding to them continuously over decades, which gave compounding the time it needed to work its magic on Buffett’s portfolio.
But what if instead of starting at 11 and continuing until 92, Buffett had taken a more conventional approach?
CNBC imagined a scenario where Buffett behaved like a kid as a kid and breezed through his 20s, job-hopping while finding himself and exploring the world. In this storyline, Buffett starts investing at 30 with $25,000, not $1 million, and retires at 60 instead of muscling through to 92.
Even if he had achieved the same astounding 22% annual returns, his net worth today would be $11.9 million. That’s still an admirable nest egg, but it’s more than 99.9% less than his real-life 12-figure fortune.
In this scenario, despite his skill and performance, the Oracle of Omaha would be just another Nebraska millionaire who got to retire a few years early and get the next generation off to a good start — and without the key ingredients of time and compounding, you would have never heard the name Warren Buffett.
Caitlyn Moorhead contributed to the reporting for this article.
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