How Amazon became one of Warren Buffett's biggest investment regrets
Investor Warren Buffett's net worth has surpassed $81 billion and yet, for all his business success, the self-made billionaire still regrets some missed opportunities. One of them is not investing in Amazon when he had the chance.
At Berkshire Hathaway's annual meeting in May, Buffett said he wished he had chosen Amazon as his value tech stock instead of IBM. As he then told CNBC, he was "too dumb" to have seen the potential in the e-commerce giant.
He largely avoided newer tech stocks such as Amazon and Google because he didn't fully appreciate their value. "That's cost people a lot of money at Berkshire," he said.
In retrospect, Buffett realized, "I did not think [founder Jeff Bezos] could succeed on the scale he has. [I] underestimated the brilliance of the execution."
Amazon is currently experiencing massive success. Its stock has risen nearly 5 percent over the past week following a projected $6.59 billion in Cyber Monday sales. According to financial website How Much, if you bought $1,000 in Amazon stock in 2007, your investment would be worth $12,398 as of October 31 of this year.
Bezos is now estimated to be the richest man in the world with a net worth of over $90 billion, slightly ahead of Buffett himself.
Despite having missed out on investing in Amazon, though, Buffett says taking some calculated risks is key to success. "You'll see plenty of times when you get chances to do things that just shout at you," he said in a 1998 University of Washington panel discussion. "When that happens, you have to take a big swing."
He added, "When you find something where you know the business, it's within your circle of competence, the price is right, the people are right, then you take your thumb out of your mouth and you barrel in."
If you're looking to barrel into the stock market yourself, Buffett, along with other experienced investors like Mark Cuban and Tony Robbins, suggest starting with index funds.
Index funds hold every stock in an index such as the S&P 500 and offer low turnover rates, attendant fees and tax bills. They fluctuate with the market, which can lower the risks that can come from picking individual stocks.
Try to make some connections with people seasoned in the field, too, as opposed to solely relying on computer algorithms and research, John D. Spooner writes in his book, "No One Ever Told Us That: Money And Life Lessons For Young Adults."
Spooner argues that building real-life relationships helped Buffett triumph.
"Buffett dispenses wisdom and common sense wherever he goes. He has a cult following, in my view," Spooner writes, "not just because he has an outstanding investment record, but also because of his wisdom, experience and counsel.
"As you get older, you suddenly realize you [may not] have the time to invest on your own. You need hands-on advice, not virtually, not by robots, but by real live smart people who consider the best interest of you and your family. Tough to find. But it can be priceless if you do."
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