Warren Buffett strongly advises against personal and high-interest debt, famously warning that "liquor and leverage" (borrowed money) destroy wealth. While he maintains a, "aversion to debt," for individuals, he utilizes long-term, low-interest debt strategically for Berkshire Hathaway to, "rarely use much debt" in a controlled manner.
Remember, high interest debt costs you more in interest than you could earn from CDs, savings accounts, or even investments. You're better off paying it down before you get more creative with your strategy.
Warren Buffett Will Only 'Rarely Use Much Debt' But Says If You Do, Structuring It Like This is Crucial. Warren Buffett has long championed a conservative financial approach to investing. He doesn't advise taking on much debt, and certainly doesn't think Berkshire, or anyone, should overleverage themselves.
"I've seen more people fail because of liquor and leverage -- leverage being borrowed money," Buffett said in a 1991 speech at the University of Notre Dame. "You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing."
Some have interpreted this to mean investing 70% of a portfolio in stocks and 30% in bonds, although work-outs seem to suggest special situations, which differ from bonds. Either way, Buffett has given different investment advice to investors based on their experience.
A 2019 study by Harvard Business Review found either Vanguard, BlackRock or State Street is the largest listed owner of 88% of S&P 500 companies. There is a perception that a few select companies own a vast majority of the stock market.
He advocates for using what he calls "good debt" as leverage to buy financial assets such as real estate. In January 2024, Kiyosaki stated that he had more than $1 billion in debt.Additionally, he is a strong proponent of buying gold and silver, often referring to them as "God's money."
Some of the world's richest individuals, like Warren Buffett and Mark Zuckerberg, are known for their frugal habits despite immense wealth. Buffett, for example, lives in the same house he bought in the late 1950s and drives himself. Zuckerberg dresses casually and puts in long office hours.
(Enter "$100" in the "Contribution amount" field, then select "Monthly" for the "Contribution frequency" option.) You would end up with $29,647.91 after 10 years, compounded daily (assuming 365 days a year). The interest would be $7,647.91 on total deposits of $22,000.
For the billionaire, debt is an arbitrage strategy that can be sustained indefinitely. When a billionaire borrows against shares, they are essentially accessing the surplus value created by the workers of that company.
Key Takeaways
Warren Buffett's “one rule” is simple but powerful: never confuse a stock's price with its value. In downturns like 1966 and 2008, that principle helped Buffett beat the market and even make billions while others lost fortunes.
Is this number correct? Our research suggests that about 70 to 90% of traders lose money. It is, of course, impossible to get an exact number, but as a rule of thumb, we believe 70-90% is close to the “correct” ballpark figure.
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10% of the U.S. population owns 93% of the stock market wealth, per the Guardian.
Actor Michael Sheen paid off $1.3 million worth of debt for his neighbors. Plus, this guy has been diving for lost golf balls for 30 years.
A majority of Americans (53%) carry some, with an average balance of $7,719. However, a third of those carrying debt (32%) owe $10,000 or more, while almost 1 in 10 (9%) have credit card debt over $20,000.
Unless your name is Jack Kellogg, the 24-year-old who earned $8 million through day trading in 2020 and 2021. Kellogg started his trading journey in 2017 with just $7,500.