Could Warren Buffett make $84 billion in today's stock market?
With a net worth of around $84bn, Warren Buffett is currently the third richest person in the world. He has been towards the top of the list for a substantial period of time, which is a remarkable feat considering that he started with a relatively modest sum when purchasing his first stock aged 11.
Clearly, he has benefitted from his own skill and judgment. But the rise in the stock market over recent decades has also been a major catalyst on his personal wealth. Given the gains made by the FTSE 100 and other major indices in recent years, is there still an opportunity for investors following Buffett's methodology to generate stunning returns?
While the FTSE 100 has risen from 1,000 points at its inception in 1984 to over 7,000 points today, the index does not yet appear to be particularly expensive. Evidence of this can be seen in its dividend yield, which stands at 4.1%. This is towards the upper end of its historic range and has, in fact, generally only been higher during periods of severe financial stress.
Certainly, the index has experienced above-average volatility of late. However, it has not yet entered bear market territory, while the prospects for the UK and global economies remain relatively positive. Clearly, there are risks ahead such as Brexit and the prospect of higher interest rates. But a 4.1% dividend yield for the FTSE 100 in what remains a relatively calm period for the economy suggests that it offers excellent value for money.
Of course, Warren Buffett has not made his $billions by simply investing in a tracker fund. Although he advocates their use for time-poor private investors, he has been a superb stock picker over the years. He has been able to identify strong companies when they trade at what prove to be attractive prices. Furthermore, he has resisted the temptation to sell, and he is still holding on to many of the companies in which he invested many decades ago.
The same opportunity presents itself to investors today. There are chances to generate high returns in new and exciting industries such as the internet of things (IoT), blockchain and artificial intelligence (AI). Similarly, more traditional industries such as healthcare and tobacco continue to offer strong growth potential due to population rises and changing consumer tastes respectively.
Within all industries there are stocks which could deliver high returns over the long run. Finding them may not be all that easy, but then again, if it was a simple process then there would be more Warren Buffetts around today.
For investors seeking to amass a large sum of capital from investing, it looks as though today is a great time to get started. In the short run there could be pressure on a range of share prices. But in the long run, it is always possible to generate stunning returns from the stock market.
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