Warren Buffett once explained what he'd do to turn $10K into a fortune if he were a new investor

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Warren Buffett is well known for his buy-and-hold investing strategy, and making solid bets on low-performing stocks when others are selling at a loss.

At his company’s annual meetings, Berkshire Hathaway’s shareholders have the opportunity to pick Buffett’s brain on any number of topics.

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One investor who attended the conference in 1999 cut right to the chase in a memorable way. “Mr. Buffett, how do I make $30 billion?” he asked.

As always, the Oracle of Omaha conveyed complicated theories in simple terms — rules that can guide any investor.

If you want to learn the ropes that helped the 94-year-old accumulate a massive fortune, here are a few of his fundamental rules to consider.

Circle of competency

Tom Watson Sr., the founder of IBM (NYSE:IBM), once said, “I’m no genius. I’m smart in spots — but I stay around those spots.” That’s the mantra Buffett has applied to his investing, too.

By focusing on industries he understands and avoiding temptation to chase trends, Buffett has built his fortune through a disciplined and patient approach.

His strategy, however, comes with an important caveat: volatility. At the 2020 Berkshire Hathaway shareholder meeting, Buffett reminded investors of the inevitable ups and downs.

“You’ve got to be prepared, when you buy a stock, to have it go down 50% — or more — and be comfortable with it, as long as you’re comfortable with the holding,” he said.

You can build your own circle of competency with trusted advisors who bring their expertise on growing wealth — and Advisor.com can help you find a financial professional that’s right for you.

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Read more: Warren Buffett used 8 simple money rules to turn $9,800 into a stunning $150B — start using them today to get rich (and then stay rich)

Start young

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 95 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 $30 billion. Today, it’s nearly five times greater at $148 billion, as per Bloomberg.

Ordinary investors can best harness the power of compounding by starting as early as possible. A great way to start your own snowball rolling is with Acorns, an automated savings and investment app that makes your spare change go to work for you.

When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess into a smart investment portfolio. Plus, Acorns lets you customize how you save and invest.

With an Acorns Silver plan, you get access to Acorns Later, a retirement investment account with a 1% IRA match on new contributions. With Acorns Gold, you get a 3% IRA match on new contributions and the ability to customize your portfolio by selecting your own stocks.

Plus, if you sign up today, you can receive a $20 bonus investment.

Search for small companies

Buffett once said that if he were starting again today with $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 $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.

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Public also has social features, enabling users to follow and learn from other investors, share ideas, and stay updated on market trends with real-time insights — kind of like your own circle of advisors, which Buffett famously relies on.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.