Warren Buffett is the world’s leading stock market investor. He’s managed to beat the market consistently in the last 50 years and his company, Berkshire Hathaway, has a cash surplus of more than $20 billion on hand for acquisitions and investing purposes. With that amount of money, it’s easy to think that Buffett could really do just about anything he wanted to.
However, things aren’t quite that simple. What most people don’t consider is that Buffett has something working against him that you, as a private investor, don’t have to worry about just yet: the size of your portfolio.
As it turns out, the larger your portfolio is, the harder of a time you have in making an impact on your finances. The one thing that you can do which Buffett simply can’t is invest in really good small companies and see a profit from them. At this point, Buffett would have to have a much larger profit to even really be noticeable. And small companies, no matter how lucrative, simply can’t produce that.
Buffett put it this way:
“Anyone who says that size does not hurt investment performance is selling,” Buffett said. “The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money.”
It’s just one more reason that you shouldn’t invest like Buffett. In short, you don’t have to. You’ll be able to make much better returns much easier than Warren Buffett simply because you’re working with smaller amounts and smaller numbers.
So the next time you’re looking at Berkshire Hathaway wistfully and wishing you were as successful as Buffett, remember that you’ve got even more opportunity right now than the Oracle of Omaha. Make the most of it!