In 1977, at the age of 19, Peter Buffet received his inheritance early. The world’s most famous investor Warren Buffet gave his son Peter $90,000 worth of stock of Berkshire Hathaway. He told him that this would be his inheritance and to expect nothing more.
Peter Buffet was an aspiring musician and saw the $90,000 as an opportunity to follow his dream. Peter sold all the shares of Berkshire. He lived off the proceeds and tried to make it as a professional musician. He moved to San Francisco, where he rented a tiny studio apartment and lived frugally. He purchased recording equipment, wrote music and perfected his craft. At the end, Peter did make it. He has released more than a dozen albums and even worked on the musical score for the Academy Award-winning film “Dances with Wolves”.
But what if Peter had chosen not to sell the stocks and instead held on to his shares of Berkshire for the long term?
When Peter received his early inheritance at the start of 1977, Berkshire Hathaway traded for $89 per share. Today, with Peter’s father still running the company at age 90, those same shares trade for $337,000. If Peter had held on to those Berkshire shares he would have made out of $90,000 at that time an incredible fortune of $341 million today!
Peter does say, he doesn’t regret selling those shares.
But the lesson to learn is that you have to be patient and give the market time. Historically, the market has gone up by nearly 10% a year on average. There are bumps along the way but in the big picture, those bumps are only blips. Diversify and give the market as much time as possible.
Sven Franssen