Warren Buffett & Charlie Munger – Investing Small Sums Of Money (2007)
You Can Always Earn Big Returns With Small Amounts of Money
WARREN BUFFETT: Number 9.
AUDIENCE MEMBER: Hi. I’m Eric Schleien from Larchmont, New York.
My question is directed at Mr. Buffett. Mr. Buffett, you claim you can do 50 percent a year.
If you had to start over with a small portfolio, would you still be doing buy and hold, buying quality companies at a good price, or would you be doing arbitrage and really getting down to the nitty-gritty Benjamin Graham cigar butts that you did in the Buffett Partnership?
WARREN BUFFETT: Yeah. If I were working with a very small sum — and you should all hope I’m not — (laughs) — if I were working with a very small sum, I would be doing entirely — almost entirely — different things than I do.
I mean, there’s — your universe expands. I mean, if you’re looking, there’s thousands and thousands and thousands of times as many options to think about if you’re investing $10,000 than if you’re investing a hundred billion.
And, obviously, if you have that many — you’ve got all the options you got with a hundred billion, except buying entire businesses, and you’ve got all of these other options.
So you can earn very high returns with very small amounts of money, and it will always be such.
I don’t mean that everybody can do it, but if you know something about values and investments, you will find opportunities with small sums, and it will not be with a portfolio that Berkshire itself owns.
We can’t earn phenomenal returns putting 3 billion, 4 billion, 5 billion in a stock. It won’t work that way. It won’t even come close to working that way.
But if Charlie or I were in a position of working with a million dollars or $500,000 or 2 million, we would find little things here and there — and it wouldn’t always be stocks — where we would earn very high returns on capital.
CHARLIE MUNGER: Yeah. But it’s — there’s no point our thinking about that now. (Laughter)
WARREN BUFFETT: But he’s thinking about it, Charlie. (Laughter)