American entrepreneur and the world's largest investor Warren Buffett returned to second place on the Forbes list of the richest people on the planet for 2016. His fortune is estimated at $75.6 billion and is second only to that of Microsoft founder Bill Gates.

The 86-year-old Buffett's main income comes from Berkshire Hathaway Corporation, where he is chairman of the board of directors and chief executive. According to the financial tycoon, he always knew that he would be rich. What helped Warren Buffett achieve such impressive success?

The first steps of a future billionaire

Warren Buffett was born in 1930 in the American city of Omaha, Nebraska, where he currently lives. In the family, he was the middle of three children and the only son. Warren inherited his love of numbers from his father, entrepreneur and politician Howard Buffett. The boy idolized his father. Howard Buffett, left unemployed during the Great Depression, managed to create his own investment company with modest savings from working as a stockbroker.

Warren was a bright child and studied at school as an external student. As a teenager, he began making money by delivering newspapers on a bicycle and selling Coca-Cola and chewing gum. Buffett began reading books about investing as a child, he found them in his father's office.

At the age of 11, he bought his first shares with money shared with his sister. When their price dropped, Warren was very worried. As soon as the shares rose in price, he quickly sold them, making a profit of $5. However, if he had waited a few more days, he could have earned almost a hundred times more. This situation taught Buffett that the main virtues of a good investor are patience and composure.

When Warren was 12 years old, the family moved to Washington, which the boy was very dissatisfied with - he loved his hometown and his school friends. He lost interest in his studies and once even tried to run away from home. His parents did not scold him, his father only said that he was capable of more. The father's endless faith in his son became the force that helped Warren achieve success. Buffett is convinced that his father was the best gift in his life.

At the age of 13, Warren managed to accumulate savings, with which he purchased a plot of land. The young entrepreneur began renting it out to farmers, thus obtaining a source of passive income.

Buffett had no intention of going to college. At the age of 16, he graduated from school and became quite successful in buying shares. The father persuaded his son to continue his studies. Warren, not wanting to upset him, went to college. But Buffett didn’t want to waste time, so he completed his studies as an external student, showing brilliant results.

The student who surpassed the teacher

After the University of Nebraska, Buffett applied to Harvard Business School. However, during the interview he was advised not to even dream of entering Harvard because he was too young.

Buffett later realized that this was for the best. Leafing through the Columbia University catalog, he recognized the names of the teachers - Benjamin Graham and David Dodd.

He read their textbook “Security Analysis” as a child. Warren wrote a letter: “Dear Professor Dodd! I thought you were no longer there. But now, having learned that you are alive and teaching, I really want to go to Columbia University.” David Dodd appreciated the bold move and accepted Buffett on the course.

Warren was happy to study with Ben Graham and considered him his main teacher after his father. The talented economist and teacher knew how to inspire his students. From Ben Graham Buffett will remember for the rest of his life

two main rules of investing:

1. Never lose money.
2. Never forget the first rule.

Ben Graham essentially became the creator of value investing. Graham urged investors to view company shares as their own stake in the business. With this approach, there is no point in worrying about temporary fluctuations in the securities market; you need to focus on the long term.

The economist believed that it was necessary to carefully study financial statements and buy shares of undervalued companies. Over the years, Buffett has continued to adhere to this advice.

At the age of 20, Warren began playing on the stock market. He analyzed information from financial directories and looked not just for stocks, but for potentially successful businesses that were undervalued by the business community. At 31, Buffett has already made his first million., becoming Benjamin Graham's most successful student.

Charismatic speaker

Buffett considers public speaking training from Dale Carnegie one of the most important things for himself. The financial tycoon admitted that in his youth he was very afraid of public speaking. To overcome his fear, he enrolled in a Carnegie course. The billionaire is sure that if it were not for these activities, his whole life would have turned out differently. That's why there are no university diplomas in Buffett's office, but a Dale Carnegie course completion certificate hangs in a place of honor.

The rise of a financial empire

Returning to his native Omaha in 1956, Buffett created his first investment partnership, Buffett Associates. Shareholders have consistently received good dividends due to his foresighted decisions.

Investors began to come to the conclusion that they should not limit themselves to shares of undervalued companies, and that it was not the shares themselves that should be bought, but the well-managed long-term business that stood behind them.

In 1962, Buffett became interested in the textile company Berkshire Hathaway, which was close to bankruptcy. He dissolved his fund and began buying up Berkshire shares. In 1965, he already had a controlling stake. Buffett headed the enterprise, redeveloping it into an investment company. By investing Berkshire's income in the insurance business, which was preferential at that time, the financier discovered a gold mine for himself. By the age of forty, his fortune was already estimated at approximately $30 million.

Buffett continued to acquire large blocks of shares in companies whose reputation he trusted. At 46, he became the owner of National Indemnity Co., and a little later - GEICO. In 1973, he invested $11 million in shares of The Washington Post newspaper, which are now worth about $1 billion. Coca-Cola securities, purchased by an investor for $1 billion, rose in price to $13 billion. Gillette shares rose in price from $600 million to $4.6 billion. Warren was nicknamed the “seer” and the “Oracle of Omaha” for his amazing instincts in the investment business.

The main feature of Buffett's approach is to avoid short-term speculation and invest long-term.

Warren Buffett's personal life

As often happens with geniuses, Buffett had difficulty communicating in his youth, especially with girls. After graduating from university, he already had professional skills in the financial sector, but in the romantic sphere he felt like a teenager.

Buffett claims that there were two defining moments in his life: his birth and meeting his future wife, Susan Thompson. Warren was crazy about her, he immediately realized that this was his soul mate. Susie realized this a little later. They married when Buffett was 21, his bride was 19. His relatives noted that the kind and caring Susan balanced Warren and made him softer.

She supported him in all his endeavors, devoted herself entirely to her husband and three children, while simultaneously engaging in charity work and the fight for civil rights. In many ways, she influenced the change in her husband’s political views. He grew up in a Republican family and became a Democrat. In 2016, he actively supported presidential candidate Hillary Clinton and even sponsored her election campaign.

Buffett was accused of not giving enough money to charity. Susan would also like to give more, but did not interfere in her husband's business. And he believed that his wife would survive him and then transfer the accumulated money to some charitable foundation so that the amount would be more tangible.

As the children grew up and began to live their own lives, Susan felt that she no longer wanted to be just a housewife. She left for San Francisco, leaving her husband in the care of her friend Astrid Menks. An official divorce never followed. Moreover, the couple maintained an excellent relationship until Susan's death from cancer in 2004. After another two years, Buffett formalized his relationship with Astrid. At that time he was 76 years old.

In 2012, he himself survived prostate cancer, but managed to cope with it. He is currently still married to Astrid.

Billionaires' hobbies

Buffett's hobbies include playing the ukulele and playing bridge with his good friend Bill Gates.

Genius, billionaire, philanthropist

Today, the core of Buffett's financial empire, Berkshire Hathaway, ranks 4th in the Fortune Global 500 ranking - the top of the world's largest companies. The billionaire became the only one who created a company from scratch that made it into the Fortune top ten.

Berkshire is a holding company that owns about 70-80 businesses that operate independently of each other and of Buffett himself. The only requirement he makes of them is not to harm Berkshire's reputation.

Warren Buffett's investment portfolio is constantly replenished with shares of international corporations and today is estimated at approximately $660 billion. At the same time, the financial tycoon adheres to the rule of investing only in what he likes:

• McDonald's;
• Coca-Cola;
• Iscar Metalworking;
• American Express;
• General Electric;
• General Motors;
• PetroChina;
• MasterCard;
• Kia Motors;
• Procter & Gamble;
• BNSF Railw;
• and much more.

It is interesting that the best investor in the world ignored the high technology sector for a long time, and only in 2011 he first invested in an IT company, and in 2016 acquired shares of the American corporation Apple for a total of about $1.5 billion.

In 2010, Buffett made history by donating more than half of his fortune to the Bill and Melinda Gates Foundation and several other foundations.

Three charities on this list are headed by Buffett's children, who wished to continue their mother's work.

The size of the donation—about $37 billion—was the largest single payment to charity in human history.

In addition, Buffett appealed to the world's top businessmen to sign the “Giving Pledge” - a commitment to give about 50% of their income to charity. In 2016, 154 people signed the oath. In his will, Buffett specified that 99% of his wealth would be distributed among various charities.

Aristocrat's breakfast

Another ingenious way to give back is the annual Breakfast with Warren Buffett, which is auctioned off and then the proceeds are donated to charity. You have to fork out for the opportunity to have breakfast with a billionaire. Over the years, the lot went for amounts ranging from $600,000 to $2.63 million, and in 2012 – for a record $3.5 million.

Humble Rich Man

Despite his billions, Buffett doesn't seem to be obsessed with money. He leads a rather modest lifestyle and is very conservative. Having the opportunity to choose to live anywhere on the planet, he continues to live in his hometown of Omaha in the house he bought back in 1957.

He has been commuting to work the same way for 55 years. At 86, Buffett drives a Honda himself. Every morning he stops by his favorite McDonald’s and, when things aren’t going well on the stock market, he even saves on breakfast. The billionaire's only weakness is jets.

Despite the fact that the head of Berkshire Hathaway works with money, he does not have a computer or even a calculator - his mind is so clear that there is simply no need for them. Buffett teaches classes to students and publishes books on investing. Warren Buffett's quotes about finance have become famous and scattered throughout the planet. The entire business community still listens to his words, calling them financial prophecies.

During his long career as a successful businessman, the Oracle of Omaha has repeatedly given advice on business, including investing and the stock market. His statements were immediately parsed into aphorisms. The press loves to quote the words of the world's most successful investor. Each of his quotes has a deep meaning. The rules thanks to which he became one of the richest people on the planet.

1. You cannot depend on one source of income. Invest in investments to earn extra income.
2. If you buy what you don’t need, you will soon have to sell what you need.
3. Constantly looking for reasons to stay in a job you don’t like, instead of finding a new one, is like putting off sex until retirement.
4. The most successful are those who do what they love.
5. You need to be prepared for a lucky chance. When gold falls from the sky, it is better to have a bucket, not a thimble.
6. Remember an important thing - this day is not subject to exchange or return.
7. Constant training becomes the key not to ideal results, but to stable ones.
8. You should not appear on the stock exchange until you can calmly watch your shares fall by 50%.
9. It is not necessary to make only brilliant decisions, it is enough not to make terrible ones.
10. Even talented people just need time to achieve good results. You won't get a baby in a month even if you get 9 women pregnant.
11. Do business with people you like and share your values.

It takes twenty years to build a reputation. And five minutes are enough to destroy it forever.

Warren Buffett is the world's largest and one of the most famous investors. He is called the legendary Oracle of Omaha. For many years, Buffett was in the top three of the Forbes list of billionaires, but in 2013 he was pushed to 4th place by the Spaniard Amancio Ortega, who rapidly increased his fortune by almost $20 billion over the year. Warren Buffett's fortune increased by only $9.5 billion over the past year. and as of 2013 it amounts to $53.5 billion. Buffett continues, together with Bill Gates, a campaign to attract businessmen to the Giving Pledge initiative, under which entrepreneurs bequeath at least half of their wealth to charity. The “oracle” itself has already spent about $20 billion as a philanthropist.

At the age of 6, Buffett made his first profit on resale - 5 cents. He began his ascent to a billionaire fortune at the age of 31 with one million. “I don’t buy stocks, I buy successful businesses,” says Buffett.

Some believe that the owner of a billion-dollar fortune lives like a cheapskate: Buffett's house cost $31,500, and could never boast of rich furnishings. Buffett's two sons and daughter grew up in almost spartan conditions, and pocket money was always tight for them. For example, when Buffett's son Howard decided to buy a farm, his father gave him an interest-bearing loan and demanded every last penny. And daughter Susan, in order to pick up her car from a paid parking lot, had to borrow $20 from Buffett against a receipt.

Buffett dined at cheap restaurants and shopped at chain stores. And when the billionaire finally made up his mind and proposed to his long-time lover, Buffett bought the ring in his own store, taking advantage of a corporate 15% discount. But the newlyweds celebrated a far from lavish wedding in an ordinary fish restaurant.

However, the amounts spent by this stingy man on charity make him seriously respected. Not everyone is capable of giving billions of dollars to charity. If all billionaires acted this way, world communism would come.

In June 2010, Buffett announced he was donating more than 75% of his wealth, or about $37 billion, to five charities. Most of the funds went to the foundation managed by Bill and Melinda Gates. This act became the most generous act of charity in the history of mankind.

Buffett studied under Benjamin Graham at Columbia University, New York. Buffett says Graham instilled in him the foundation of smart investing and describes him as the person who had the greatest influence on his life after his father. Warren Buffett follows a long-term investment strategy - the average holding period for a stock is 10 years.

First principle. Investing is about investing money today and getting more money tomorrow.

Warren Buffett has always led a fairly modest lifestyle: instead of living in expensive cottages and eating in restaurants, he invested every spare cent in stocks. Over 35 years, he increased the amount from $100 thousand to $53.5 billion.

Buffett famously joked about his modest lifestyle: “I actually wear expensive suits, they just look cheap on me.”

Second principle. Buy shares only of companies whose products you personally like.

Buffett said that in the mornings he liked to read the Washington Post newspaper. In 1972-1974, during the general crisis on the stock market, the newspaper's shares fell by 40%. Having analyzed the state of affairs, Buffett purchased shares of his favorite newspaper for $10 million. The value of the newspaper's shareholding has increased 100-fold since 1973 - $10 million in investments brought about $1 billion in income. The acquisition of a 9 percent stake in the company that makes his favorite Gillette razor increased his investment by 4.5 times.

Third principle. Never invest in areas you don't understand.

Fourth principle. Never stand on ceremony with unprofitable enterprises.

If you don’t like the company or something went wrong, don’t waste your nerves and money on an incomprehensible company, get rid of the shares.

Fifth principle. Behind every rising stock is a successful business.

“Price takes everything into account,” says a well-known saying among traders, and if everything is good in a company and earnings are growing, then the shares of such companies are doomed to grow.

Sixth principle. Invest in businesses with international networks.

Any business has certain risks: country, industry, regional, etc. By investing in a company that operates around the world, we cover a significant portion of the risks. Reducing the level of risks gives higher stability, and possibly profit.

Seventh principle. There are winning stocks in the market, and we need to find them.

Some companies always grow faster than others. The economy of each country develops unevenly, there are industries experiencing stagnation and even decline, and others showing high rates of growth and development. The same thing is observed among enterprises in the same industry; there are leaders and there are outsiders.

Eighth principle. If you use calculations, you won't necessarily reach the top, but you won't plunge into madness.

Undoubtedly, there are special methods of market analysis, and it is necessary to use them: read news reports, look at company reports and raw material price charts. Use analysis and you will stand out from the general crowd of uneducated investors, and accordingly your profits will increase.

Ninth principle. The most important thing is the history of the companies.

Buffett often likes to repeat this phrase. From a financial master's point of view, investors too often make the same mistake of “looking in the rearview mirror.” They try to assess the situation based on a very short past, missing out on great opportunities. It is necessary to see the history of the development of the entire company, and not short-term events. Those who did not understand this principle were badly burned by the memories of the 1998 crisis. While investors were crying about lost profits, the market was picking up speed on rising oil prices and an influx of foreign investment.

Tenth principle. The service of the muses does not tolerate fuss.

“I buy stocks and I don’t care what happens to the market the next day,” Buffett says. “However, it is not at all difficult to predict what will happen to the market in the long term.”

The main difference between an investor and a speculator: a speculator buys to sell, an investor to hold. For a serious investor, preliminary work on selecting stocks for investment takes quite a long time, sometimes up to six months. After such preliminary work, the option: buy and immediately sell in order to earn change is simply not interesting. As Warren Buffett said, “Why buy a stock you wouldn't want to own for the rest of your life?”

At age 11, Buffett decided to try trading the stock market. Teaming up with his older sister and borrowing money from his father, he bought three shares of Cities Service preferred stock at $38. Soon their price dropped to $27, and then rose to $40. At this point, he sold the shares in order to lock in a profit and earned $5 minus the commission. However, just a few days later, Cities Service's price exceeded $200 per share. Buffett still remembers that mistake and adds that life taught him the main principle of investing - “patience pays off.”

And Buffett also formulated eight rules of investing:

1. Put your action plan in writing or keep it in your head, but most importantly, stick to it as strictly as possible in practice.

2. Be flexible: If any circumstances or new information changes the situation significantly, make changes to your plan of action.

3. Study the dynamics of the company's sales volume and profit. Analyze the sources of their receipt.

4. Focus on the potential investment object. Carefully analyze the range of products the company produces or services provided, its position in the industry as a whole and in comparison with its closest competitors.

5. Collect as much information as possible about the people running the company.

6. If you've found a great investment, don't worry about negative market or economic forecasts.

7. Don't invest just for the sake of investing money. If there are no suitable objects, keep your capital in cash. Many overly emotional investors, not finding the ideal investment property, buy the best available and subsequently regret it.

8. Determine for yourself what you are good at and what you are not. Invest only in companies whose business you know.

List of assets owned by Berkshire Hathaway

Berkshire Hathaway's investment portfolio is currently valued at $661 billion.

Insurance and finance

Applied Underwriters

Kansas Bankers Surety Company

National Indemnity Company

Wesco Financial Corporation

United States Liability Insurance Group (75%)

Central States Indemnity Company

M&T Bank (4.2%)

Kemper Insurance Co

(Bank of America)

Nutrition

Anheuser-Busch (9.8% as of end of 2005)

The Pampered Chef

H. J. Heinz Company (50%)

Cloth

Fechheimer Brothers Company

Fruit of the Loom

Garan Children's Clothing

H.H. Brown Shoe Group

Furniture production and sale

CORT Business Services

Jordan's Furniture

Nebraska Furniture Mart

RC Willey Home Furnishings

Materials and construction

Acme Brick Company

Benjamin Moore & Co.

ISCAR Metalworking (80%)

Precision Steel Warehouse, Inc.

Media

The Washington Post Company (23.42% as of end of 2004)

Omaha World-Herald

Logistics

XTRA Corporation

Jewelryproducts

BenBridge Jewelers

Borsheim's Fine Jewelry

Helzberg Diamonds

Other

Scott Fetzer Companies

MidAmerican Energy Holdings Company

Procter & Gamble (1.93% as of end 2005)

PetroChina (1.3% as of end 2004)

Blue Chip Stamps

Adwork Govnashiko

BYD (10% as of September 2008)

A charity lunch with billionaire Warren Buffett was sold at an online auction for $2.6 million. The buyer was a fan of the entrepreneur who wished to remain anonymous. What is known is that he gets the right to meet the billionaire at the elite meat restaurant Smith and Wollensky in the center of New York in Manhattan.

Of course, auction participants shell out crazy amounts of money not for the sake of juicy steaks, but for the sake of the personality of Warren Buffett - the legendary 86-year-old American investor, owner of the Berkshire Hathaway holding, even during his lifetime. As of 2017, he ranks second in the Forbes global list of billionaires, with his fortune estimated at $76.9 billion.

Buffett previously said that lunch usually lasts about three hours, during which he is allowed to raise a variety of topics, with the exception of his own investment plans.

The right to lunch with the legendary investor has been sold annually since 2000. For the first time, the winner managed to have lunch with a financier for $25 thousand. During such auctions, the businessman managed to attract over $24 million. Today’s winner paid a substantial, but not a record amount. The most expensive lots were in 2012 and 2016 - about $3.5 million. And both then and now, these lucky ones chose to remain incognito, which is quite acceptable by the rules that Buffett himself established.

All proceeds from the event traditionally go to the Glide Foundation, which provides medical care and approximately a million free meals to those in need throughout the year. And in general, Buffett bequeathed most of his gigantic fortune to charitable needs, and he leads a very modest lifestyle for his status - he gave himself a salary of $100 thousand a year, eats in ordinary eateries, uses a used car and spent his entire life in his native Omaha .

The principles of its operation have long been described and at first glance seem very simple. In particular, he invests money only in those businesses that he understands and whose products he personally likes, and believes in his strategy, stubbornly following it and believing in its long-term performance, no matter how the current situation in the markets develops.

But the simplicity of Buffett's principles, as it turns out, does not allow a wide range of investors to repeat or even come close to his success. All this encourages people to shell out so much money to try to learn the secrets of the stock exchange guru in personal communication. For example, investor Guy Spear, who had lunch with Buffett in 2007, even wrote a book about how this conversation influenced his approach to investing.

In general, charity dinners are not new for America; many stars of show business, sports and politics do this. But the price of a meal with them is tens, at best hundreds of thousands of dollars. And only old Buffett is able to “raise” a couple of millions for a meal.

“For many years, Buffett worked for himself and his name, and now the name works for him,” notes Russian investor, managing partner of the financial group Fedor Spiridonov. “His name is a very expensive brand, for which people are willing to pay top dollar to be associated with it.”

Billionaire Warren Buffett is known as one of the richest investors in the world, with his wealth seemingly growing by the day. But the Oracle of Omaha wasn't always as rich as it is now.

In fact, he earned 99% of his enormous wealth after his 50th birthday.

But that doesn't mean the 84-year-old Buffett was a failure until now. He began his financial journey to prosperity at a very early age, and built his wealth gradually over many years, decade by decade - something that all of us can do with a little persistence and a lot of hard work.

WARREN BUFFETT'S WEALTH IN DIFFERENT YEARS OF HIS LIFE

Buffett was born in 1930, at the height of the Great Depression, and showed his savvy and business acumen while still a child. At age 11, he was already buying shares: several preferred shares of Cities Service for $38 per share. When he was a teenager, he filed his first tax return, while also delivering newspapers and owning several slot machines at various locations. By the time he graduated from high school, Buffett had already purchased a 16.19-acre farm in Omaha, Nebraska, and sold his slot machine business for $1,200.

Legend has it that as a young man, Buffett once said, quite prophetically, that he would be a millionaire by the time he was 30, “and if not, I would jump off the tallest building in Omaha.”

Take a look at Warren Buffett's net worth and earnings (according to Dividend.com), and compare it to the average US household income over the years (U.S. Census Bureau statistics). Find out how rich Warren Buffett was during your age and compared to the rest of America at the time.

WARREN BUFFETT AT 20-30: FIRST $100,000

After graduating from college, Buffett worked for his father's brokerage office as a stockbroker. When Buffett was 21, his net worth was a modest $20,000.

At the age of 24, Buffett was offered a job by his mentor, Benjamin Graham, with an annual salary of $12,000. According to U.S. Census Bureau, this was already about three times the annual median income of the average family in 1954—proof that Buffett was doing well on his path to success. By his 26th birthday, Buffett had net assets of $140,000.

WARREN BUFFETT AT 30-40: MILLIONAIRE STATUS

When Buffett turned 30, his net assets were estimated at $1 million. In 1960, the average household income in the United States was $5,600 per year.

By the age of 35, Buffett's business partnerships had grown to $26 million. The future billionaire bought a controlling stake in Berkshire Hathaway in 1965 (according to CNN), and by 1968 his partnership had grown to $104 million. At 39, Buffett's net worth was $25 million.

WARREN BUFFETT AT 40-50: RECOVERY AFTER FINANCIAL DIFFICULTIES

By the age of 43, Buffett's personal net worth was estimated at $34 million. A year earlier, he used part of his capital to buy See's Candies for $25 million, an investment that was still generating income in 2015. But in the mid-1970s, Berkshire fell on hard times. By 1974, the company's falling shares had reduced Buffett's net asset value to $19 million. Buffett turned 44 that year.

Not a man to let his investing skills fall by the wayside, Buffett was able to recover financially. By the end of the decade, and at age 47, he had increased his net worth to $67 million. At that time, the average annual income of households in the United States was $16,530.

WARREN BUFFETT AT 50-60: BECOMING A BILLIONAIRE

Buffett's net worth totaled $376 million in 1982 and increased to $620 million in 1983. In 1986, at age 56, Buffett became a billionaire - all while earning a modest salary of $50,000 from Berkshire Hathaway.

Meanwhile, the average American family in 1986 earned about half as much as the Oracle of Omaha's salary—the median household income was $24,900. As Buffett approached his 60s, his assets were valued at $3.8 billion.

WARREN BUFFETT AT 60-70 YEARS OLD: GROWTH OF BERKSHIRE AND BUFFETT'S ASSETS

In a letter to Berkshire Hathaway shareholders in 1990, Buffett wrote that he thought the company's assets would decline over the decade, and the second half of 1990 confirmed his predictions. But at the end of the year, the company was able to reach $362 million. Buffett’s personal fortune was also growing - by the age of 66, he owned $16.5 billion.

During the 90s, the average American family began to creep up on Buffett in terms of salary. According to the Census, the median annual household income by the end of the decade was close to $42,000.

WARREN BUFFETT AT 70-80: CHARITY AND GROWTH

In six years - from age 66 to 72 - Buffett's wealth more than doubled. At 72, he was worth a whopping $35.7 billion. But Buffett is starting to share his fortune. In 2006, he circulated letters promising to eventually donate 85% of his fortune to five charities, CNN reports.

The median household income in 2000 was $42,148.

WARREN BUFFETT AFTER 80: THERE IS NO LIMIT TO PERFECTION

As of mid-August 2015, Buffett's assets total $67 billion, making him one of the richest billionaires in the world after Bill Gates and Carlos Slim Helu. At 84, Buffett still appears to have no plans to rest on his laurels. Although he has an 11-figure net worth, Buffett earns just $100,000 a year from Berkshire Hathaway and spends it sparingly.

To this day, the investment master earns much more than the average American family. According to the most recent data from the Census Bureau, the average household income in the United States is about $51,939 per year.

Warren Buffett (Photo: Kevin Lamarque/Reuters)

One of the richest people in the world, American investor Warren Buffett published another message to the shareholders of his company Berkshire Hathaway (available on its website, .pdf). Buffett, now 86, has been writing these letters since 1965, and over time they have acquired cult status among investors. This year, interest was fueled by the fact that Buffett was expected to comment on the new US President Donald Trump, his economic policies and the prospects for the American economy under him. During the presidential campaign, the head of Berkshire actively supported the Democratic candidate Hillary Clinton, who lost the election.

America will prosper no matter what

Buffett did not mention Trump once in his letter, but made it clear that he does not approve of the new president's immigration policies. “From the beginning 240 years ago (since 1776, when the US Declaration of Independence was adopted. - RBC"America has combined human ingenuity, the free market system, talented and ambitious immigrants, and the rule of law to create an abundance our Founding Fathers could never have imagined," Buffett wrote. “Immigrants have made this country happy. They come here and find something that unlocks their potential, and we [Americans] are a product of that,” he said earlier this year at a speech at Columbia University (quoted by Bloomberg).

Year after year, Buffett continues to admire the “dynamism of the American economy”: he believes that the long-term prosperity of the United States is not threatened by either political changes or market turmoil. “This economic creation will bring more and more wealth to our descendants. Yes, the accumulation of wealth will be interrupted for a short time, from time to time. But it won't stop. “I will repeat what I have said in the past and plan to say in the years to come: the children born in America today are the luckiest generation in history,” Buffett writes.

Market crashes will happen again

However, Buffett warns that the current bullish trend in the US stock market, which began in 2009, will sooner or later be interrupted: “The coming years will periodically bring with them large declines in indexes and even market panics that will affect almost all stocks.” “No one can say exactly when these traumatic events will occur, not me, not Charlie (Munger, Buffett’s partner at Berkshire Hathaway. - RBC), neither economists nor the media,” writes Buffett. But he urges not to be afraid of such cataclysms: “General fear is an investor’s friend, because it opens up opportunities for acquisitions at a favorable price.” Even if an investor is not willing to actively buy during periods of market turbulence, one can successfully ride out the storm by investing in “large American businesses with a conservative financing model,” the billionaire advises.

How Buffett made money from the crisis

In 2008, at the height of the Wall Street crisis, Buffett financed Goldman Sachs with $5 billion, receiving in return the bank's "perpetual" preferred shares with a dividend yield of 10% ($500 million per year). In March 2011, Goldman bought these preferred shares from Buffett for $5.5 billion. Taking into account the dividends paid ($1.25 billion), Buffett earned $1.75 billion, that is, 35% of the initial investment.

In addition, in 2008, Berkshire Hathaway, as part of the same transaction with Goldman Sachs, received the right to buy up to 43.5 million ordinary shares of the bank over a five-year period at the crisis price of $115 per share. In 2013, as a result of the increase in the value of the bank's shares and the renegotiation of the agreement, Berkshire received about 13 million shares of Goldman Sachs for free. At the end of 2016, Berkshire had 11.4 million shares of Goldman Sachs remaining, which generated a “paper” profit of $2 billion, according to Buffett’s letter to shareholders.

Buffett made a similar deal in 2011, when he lent $5 billion to Bank of America in exchange for preferred shares generating $300 million in annual income and the right to buy back 700 million of the bank's common shares for the same amount ($7.14 per share). Bank of America shares closed on Friday, February 24, at $24.23, implying Buffett's current paper profit of $12 billion. The option can be exercised at any time until September 2021. Berkshire can do this by exchanging its Bank of America preferred shares for common stock. In a letter to Berkshire shareholders, Buffett writes that he is willing to carry out such a conversion if Bank of America increases its dividend on common shares by at least 47%.

Photo: Zuma/Global Look Press

Buffett vs. Wall Street Managers

Buffett devotes a separate chapter in his message to a comparison of active and passive investment strategies and the problem of unreasonably high commissions that managers collect for the service of “active” stock selection. In 2007, Buffett and Protégé Partners fund manager Ted Seeds bet $500,000 that a conventional index fund that passively tracks the S&P 500 would outperform a professional manager's index of hedge funds, after taking into account the investor's fee costs. The bet ends on December 31, 2017, but with a year to go, it's clear that Buffett is winning by a landslide.

In his letter, Buffett cites the nine-year performance of Seeds' five funds and the Vanguard S&P index fund. While a passive strategy would have returned 85.4% over this period, only one of the hedge fund funds would have returned more or less comparable (62.8%), while the other four would have returned only 2 .9 to 28.3%.

According to Buffett, the huge fixed fees charged to investors by hedge funds and funds of hedge funds are “absolutely not justified by their performance,” but managers are “basking in the rewards.” He estimates that over a nine-year period, nearly 60% of the total income generated by the five funds he bet against went into the pockets of managers. “When trillions of dollars are managed by Wall Street people who charge high fees, exorbitant profits usually go to the managers, not their clients. Investors large and small are better off relying on low-cost index funds,” the billionaire concludes.

Buffett's super profitable machine

23,4% — Berkshire Hathaway stock prices increased by so much in 2016; The growth of the S&P 500 index, taking into account the reinvestment of dividends, was only 12%

20,8% — average annual growth of Berkshire shares in 52 years that Buffett runs the company (vs. 9,7% at the S&P index)

$223.6 billion— Berkshire’s consolidated revenue for 2016 (an increase of 6% compared to the previous year), net profit remained at the 2015 level — $24.1 billion

$76.3 billion- Warren Buffett's personal wealth according to Forbes as of February 25

More than 90 operating companies include Berkshire Hathaway, including insurance companies GEICO and General Re, railroad BNSF, electric utility Berkshire Hathaway Energy, etc. In 2016, Berkshire acquired $32.7 billion aerospace and energy equipment manufacturer Precision Castparts and battery manufacturer Duracell for $4.2 billion.

​ $122 billion— the market value of Berkshire's portfolio investments in shares of US companies, including Wells Fargo ( $27.6 billion), IBM ( $13.5 billion), Apple ( $7.1 billion), at the end of 2016

$100 billion fund

The most important segment of Berkshire's business is insurance: the company's model is based on the fact that the insurance division (BH Reinsurance, General Re, GEICO) collects insurance premiums that can be invested in the purchase of companies and stocks. For Berkshire, this amounts to a cheap "loan" or, as Buffett puts it, a "revolving fund": while the company pays out billions of dollars to policyholders each year, it raises billions of dollars by writing new policies. Buffett calls this amount of cash available through insurance premiums a float. At the beginning of 2017, this figure exceeded $100 billion for the first time in Berkshire's history, Buffett said in a letter, due to a deal with AIG. It agreed to pay a Berkshire unit $10.2 billion to reinsure long-term risks on its insurance policies.

At the same time, Buffett argues that Berkshire is much more conservative in relation to risks than most insurers. “If the insurance industry were to suffer $250 billion in losses due to some mega-catastrophe (three times the current loss record), Berkshire as a conglomerate would still post significant annual profits,” the billionaire wrote.

Quotes from Warren Buffett's letter:

“Today I would rather have a colonoscopy than issue new Berkshire shares” (about the unsuccessful experience of buying companies with Berkshire Hathaway’s own shares).

“Sometimes it appears from shareholder or media commentary that we intend to hold certain shares 'in perpetuity.' It is true that we have some shares that I do not intend to sell. But we have made no commitment that Berkshire will hold any of the marketable securities at all times."

“If 1,000 managers make predictions about the market at the beginning of each year, it is likely that there will be one whose predictions come true for nine years in a row. Of course, among 1000 monkeys, with exactly the same probability there will be one “wise” prophet. The difference is that this lucky monkey will not have a queue of people in front of him willing to trust him with their investments.”