Warren Buffett once explained how he'd turn $10,000 into a huge fortune if he were a new investor

Berkshire Hathaway’s annual meetings give shareholders the opportunity to pick CEO Warren Buffett’s brain on a wide range of topics.

However, one investor who attended the conference in 1999 cut right to the chase. “Mr. Buffett, how do I make US$30 billion?” he asked.

As always, the Oracle of Omaha conveyed complicated theories in simple terms. Here are the three crucial rules that helped the 94-year-old accumulate a massive fortune and could help ordinary investors too.

Buffett’s best advice for investors is to get started as early as possible. He has a simple metaphor to explain his wealth-building strategy. “We started with a little snowball on top of a very tall hill,” he said. “We started at a very early age in rolling the snowball down, and of course, the nature of compound interest is that it behaves like a snowball.”

Indeed, the length of Buffett’s career is a key piece of his enormous wealth. He bought his first stock at the age of 11. He’s now 94 years old and still actively investing. In fact, the majority of Buffett’s wealth was accumulated after he turned 65. In 1999, his net worth was just US$30 billion. Today, it’s US$143 billion, as per Bloomberg.

Staying invested over a long period of time is crucial. Ordinary investors can best harness the power of compounding by starting as early as possible.

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Buffett said that if he were starting again today with US$10,000, he would focus first on small businesses. “I probably would be focusing on smaller companies because I would be working with smaller sums and there’s more chance that something is overlooked in that arena,” he said at the shareholder meeting.

In his early days, the billionaire investor focused on extremely small companies that would be considered small-caps. He bought a tiny furniture company in Nebraska in 1983 when it was still expanding across state lines. He acquired See’s Candies when it made just US$4 million in annual profits in 1972.

These small businesses were overlooked and had more room to grow. That means Buffett had a chance to buy them cheap and watch them expand. This is also true in 2023. Small cap stocks are roughly 30% cheaper than large cap ones at the start of the final quarter of 2023, according to analysis by BNP Paribas.