Overlooked secrets to compounding wealth at old age

Do you know that Warren Buffett made over 90% of his wealth after the age of 50?

Warren Buffett started investing when he was 11 years old. When he reached 30, he became a millionaire. As he continued to build on his financial prowess, he became a billionaire in his 50s. In 2022, his net worth is close to $100 billion.

Warren Buffett’s investment acumen is legendary. However, this alone does not account for his astounding performance. What is sometimes overlooked is the fact that Warren Buffett continues to work in an area that he is phenomenally good at and this work continues into his 90s.

While not many of us can have such an early start in investment education or have control over the genetics that we are born with, there are nevertheless two takeaways that we can implement:

1.Have an allocation to equity even in old age

An allocation that focuses only on capital preservation at the expense of growth runs the risk that it may be insufficient to meet the monetary needs at one’s old age. A common rule of asset allocation by age is that one should hold a percentage in equity that is equal to 100 minus the current age, although with growing life expectancy, there has been calls to revise the 100 to 110 or even 120. Individual circumstances may ultimately dictate the ideal allocation to equity on a case by case basis, although what is clear is that even at old age, some exposure to growth assets such as equity should be a necessary component of one’s retirement plan.

2. Aspire to maintain good health well into our old age

Not everyone is born with Warren Buffett’s genes to regularly consume fast food and still be healthy at old age. As a result, we would be well advised to fall back on more scientific evidence on how we can age well.

Physical Activity

Physical fitness is a cornerstone of healthy aging. Scientific evidence suggests that healthy individuals not only live longer but better, as exercise lowers the risk of developing age-related diseases such as type 2 diabetes. Guideline from WHO suggests 150-300 minutes of moderate intensity exercise each week for all adults aged 18-64. The key is to make a start gradually and find ways to stay the course.

Good Night’s sleep

Warren Buffett is well-known for valuing his 8 hours of sleep daily. Getting sufficient sleep helps one stay healthy and alert, improve our memory and reduce the risk of getting dementia.

Healthy Diet

A balanced diet and healthy eating are important for aging. A diet with loads of fresh fruits and vegetables, whole grains, lean proteins, and healthy fats can keep the immunity system strong and keep diseases at bay.

Engagement in stimulating activities

Warren Buffett likes to read, and spends many hours a day reading. We may have different activities that we consider stimulating, but the key is to stay engaged and participate in hobbies and leisure activities.

Stay Connected

Staying connected with others is beneficial for our mental well-being. Social isolation can lead to higher risk for depression and cognitive decline. Technology has opened up many channels for new connections to be formed and for old connections to be maintained, so we should embrace the possibilities presented.

By looking after our physical and mental health, as well as having adequate exposure to equity, we will be giving the best chance for our assets to grow and compound.

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