I was shocked by how colossal his house is...
The legendary investor (known to some as the "Oracle of Omaha") is one of the richest men in the world. But despite his immense wealth, Buffett is portrayed as a simple guy, famous for still living in the house he bought in 1957 for $31,500.
So while investigating a few investment possibilities in Omaha, Nebraska... I decided to swing by Buffett's home to see how simple it really is.
In my mind, I pictured an understated rancher home built in the then-outskirts of Omaha... just like so many others thrown up in thousands of new suburban communities all over the country in the '40s and '50s.
Boy, was I wrong.
Buffett's house is huge... a beautiful five-bedroom, light brown- and white-brick home, with a Craftsman sort of flavor. It has clearly been renovated over the years, with a new roof recently placed and impeccable landscaping. But what struck me the most was its size.
Today, it's worth more than $650,000. Almost anywhere on the East Coast, that house would easily go for $1 million or more. But not here in Omaha.
On the surface, it would seem Buffett's home investment hasn't done so well – barely 5.85%. That's much less than the 20% per year he has averaged over 50-plus years of investing through his firm, Berkshire Hathaway.
But for the world's best investor, his home is a sleep-well-at-night investment. Buffett didn't speculate on his house and pay some crazy multiple of his gross income.
Instead, he bought an affordable home and watched it appreciate a little bit every year. He didn't lose much in the downturns, because he didn't consume too much house in the beginning.
It's an important lesson... To become wealthy, you don't need a fancy home in San Francisco or Los Angeles. You don't need to spend money on fancy clothes or cars. What's critical for a wealthy retirement is saving money and investing regularly.
But most Americans don't understand how to do these things...
We've created a generation of people who consume instead of saving and investing. Just take a look at what has happened to the savings rate in this country in the chart below...
We've dropped down from double digits in the '70s and '80s to less than 7% today. Since the last recession ended in 2009, Americans haven't improved their saving power.
So people are already behind... Then, to make matters worse, they have to fork over a double-digit percentage of their annual earnings to the government.
The personal savings rate is just 6%. The effective federal tax rate for the average American is around 14%. That's before state and local income taxes, property taxes, sales tax, and levies that are added to the costs of things like gasoline and alcohol.
Even after you pay your income taxes and add to your savings, your investments get taxed – in some cases – over and over again. Capital gains, interest, and dividends all create taxable events. Most Americans pay a 15% tax rate on long-term capital gains. That's a major drag on your wealth-building.
You can't create wealth without savings. And without investing those savings, you can't retire comfortably.
These are the most critical things you can do to secure your future. And you can get ahead. But it helps to start with the right tools...
One of the simplest and most powerful ways to shelter your wealth from the IRS... grow money for retirement... and have freedom in your investment choices... is with an individual retirement account, or "IRA."
With this type of tax-deferred account, you park your cash and compound your wealth tax-free. You don't have to pay taxes on capital gains, dividends, or interest income for any stocks, bonds, or funds you hold within it.
You can use an IRA much like you would use a regular brokerage account. You can buy stocks and bonds. You can sell covered-call options. And if you have a fully self-directed IRA, you can invest in many other assets, including real estate, private stocks, businesses, and even precious metals.
And best of all, if you do all your trading inside a retirement account, you don't have to report any trades to the IRS. The goal is simply to maximize your total returns as quickly and as easily as you can... and to get better returns than a pension could offer.
So to give your Buffett-style wealth-building a boost, stick it to the taxman... and start supercharging your retirement savings with an IRA.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Editor's note: On Wednesday, June 19, Doc is hosting his first-ever Trading Master Class. He's going to show you a little-known strategy that can make money in up, down, or even flat markets... while risking less capital than you would buying stocks the typical way. Tune in at 8 p.m. Eastern time, for free, to watch him demonstrate it step-by-step. You can add your name to the guest list here.
Further Reading
Doc says one of the most dangerous human behaviors is extrapolation – particularly when it comes to investing. But you don't have to suffer from this problem... Learn more here.
"Everybody wants to be the bold investor who shorted the housing market or the dot-com boom at exactly the right time," Doc writes. "But for every investor who pulled those tricks off, you will find hundreds who went bankrupt." Get the details on a better strategy right here.
Local government projects require upfront cash. They get the money through issuing debt known as municipal bonds. And Doc has an easy way to put money to work in munis right now...
TRIPLE-DIGIT GAINS FROM A FAST-GROWING FIELD
Today's company is capitalizing on a booming tech trend...
The world's biggest businesses increasingly rely on the cloud for their digital operations... meaning that their data and communications run through the Internet rather than staying only on their own computers. The cloud-services field has been exploding, and research firm Gartner forecasts it will nearly double again between 2018 and 2022. That's great news for this company...
Twilio (TWLO) is a $19 billion cloud-communications provider whose platform lets users message or call each other over the Internet. Its customers build these functions into their own websites and mobile apps – supporting everything from customer-service hotlines to automated text alerts. The company isn't yet profitable, but it's growing fast. Revenue grew 81% in the most recent quarter compared to the same period last year, reaching $233 million... 5% more than Wall Street expected.
TWLO shares have soared along with revenue – they're up roughly 140% over the past year and recently hit a new all-time high. Investors are excited about cloud computing's rise... and if it keeps beating estimates, they'll keep betting big on Twilio...
