September 20, 2023

Warren Buffett transformed his neighbor’s savings from $67,000 to $400 million

In 1965, a middle-aged couple in Omaha, Nebraska, faced a common but challenging situation: how to plan effectively for retirement. Dorothy and Myer Kripke had saved diligently and received a modest inheritance that put them way ahead of their peers in retirement planning. By that year, their savings were about $67,000, which, adjusted for inflation, would amount to about $650,000 today.

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Their primary concern was the preservation and growth of their nest egg to ensure it was available when they retired in the next ten or two years. After months of deliberation and stress, Dorothy gave her husband a simple solution: “Myer, invest the money with your friend, Warren.”

This acquaintance was none other than 35 years old Warren Buffett. He was a neighbor who had already built up a good reputation locally as a skilled money manager.

Little did they know that Dorothy and Myer Kripke had come across a man who would later be hailed as one of history’s greatest financial investors. Known as the Oracle of Omaha, Buffett would later go on to run an investment firm with assets totaling approximately $500 billion.

The Kripkes got to know Buffett through casual bridge games and holiday gatherings.

Myer initially had reservations about entrusting their savings to a young up-and-coming money manager. He feared it would damage their friendship and doubted whether it was wise to combine business relationships with personal ones. Buffett’s minimum investment requirement at the time was $150,000, making it seemingly impractical to approach him with less than half that.

Dorothy’s determination prevailed, and despite Myer’s three-year resistance, he finally contacted Buffett. Buffett agreed to manage their money without hesitation, emphasizing his desire to maintain their friendship even in the face of possible losses. “I loved Myer [and] I wanted people who, if things went bad, could still be friends,” Buffett said.

Their collaboration blossomed, and over the next three decades, Buffett’s company expanded exponentially. At the same time, the Kripkes’ $67,000 initial investment quickly multiplied.

“We came in quite early with a modest amount. Then it exploded like a nuclear bomb,” Myer said of their financial journey.

Their wealth grew and the Kripkes went from millionaire to multimillionaire. By the mid-1990s, their $67,000 had skyrocketed to more than $25 million, which today, factoring in inflation, would be about $40 million.

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During that period, Berkshire Hathaway Inc.The share price fluctuated between $20,000 and $40,000 per share. Assuming they owned about 833 shares at an estimated price of $30,000 per share, the Kripkes’ net worth reached $25 million in the mid-1990s. Had they kept these shares until Dorothy’s death in September 2000, their value would have doubled to $50 million. By the time of Myer’s death in May 2014, with Berkshire stock trading at $215,000 per share, their 833 shares would have been worth $180 million.

Today, someone who owns 833 shares of Berkshire Hathaway would have a fortune of approximately $394,222,356 — nearly $400 million — all for an investment of $67,000.

The value of long-term investing

These stories show the compounding possibilities of investing for the long term. Finding the right stocks with strong long-term growth potential and then believing in the investment thesis can yield incredible results over the years. For those inclined, startup investment platforms like StartEngine allow investors to own shares in companies at the earliest stages, including investments in StartEngine itself. This allows investors to invest in companies before they go public, multiplying the potential profits that would otherwise not be available after the IPO.

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