You can learn from Warren Buffett’s First Investment Mistake

Warren Buffett, chairman and CEO of Omaha, Nebraska’s Berkshire Hathaway holding company, is one of the world’s most well-known investors, with a net worth north of 145 billion.

^{Photo Credit: Eric Francis | Getty Images. Warren Buffett.}

However, like all successful investors, Buffett had to start somewhere.

In his history The Snowball: Warren Buffett and the Business of Lifeauthor Alice Schroeder recounts Buffett’s early fascination with money — and the important lesson he learned from his first investment.

Related: Warren Buffett Was ‘Terrified’ of Public Speaking. Here’s the Secret That Helped Him Speak to 40,000 People at Berkshire Hathaway’s Annual Meeting.

Buffett got his first taste of business at the age of six when he started selling packs of chewing gum. “I used to buy field packets from my grandfather and go door to door in the area selling these things,” Buffett told Schroeder. “I used to do that in the evenings, especially.”

Eventually, the young entrepreneur moved on to selling Coca-Cola, a more lucrative venture that earned him a nickel for every six bottles. Selling golf balls at the Elmwood Park golf course and peanuts and popcorn at University of Omaha football games.

One day, Buffett visited the library and came across a book called A Thousand Ways to Make $1,000, which opened his eyes to the power of compound interest. Buffett wanted to try it himself.

Related: Want To Be A Millionaire? Follow Warren Buffett’s Four Laws.

The following year, 1942, 11-year-old Buffett had saved $120 to buy his first stock: Cities Service Preferred. He took his sister Doris as a partner and bought three shares for each of them for $114.75.

Unfortunately, the market crashed in June, and Cities Service Preferred fell from $38.25 to $27 a share, a fact that Buffett’s sister “reminded” him every day, Schroeder wrote. Therefore, when the stock has recovered enough to receive a small profit – $ 5 a share – Buffett is sold.

After that, Cities Service Preferred rose to $202 a share.

Related: Warren Buffett Finally Reveals Mystery Company Received R6.7 Billion Investment From Berkshire Hathaway

Buffett tells Schroeder that the experience was one of the most important things in his life because it taught him three lessons about investing:

1. Don’t “overcorrect” what you paid for the stock.
2. Don’t rush to sell for a small profit.
3. Don’t invest in someone else’s money unless you know you can succeed.

This lesson has worked for Buffett, now 94, over the years. In August, Berkshire Hathaway exceeded $1 trillion in market value for the first time.