Warren Buffett "Guaranteed" He'd Get 50% Annual Returns With Only $1 Million As Berkshire's Cash Hoard Soars To Over $189 Billion

Legendary investor Warren Buffett has long advocated for the average investor to regularly put money in an S&P 500 index fund rather than buying actively managed funds. However, that's not to say he doesn't think massive outperformance isn't possible.

As far back as 1999, Mr. Buffett famously said he could achieve 50% annual returns if he had only $1 million to manage, stating, "The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."

Don't Miss:

• Startup behind ‘the #1 free contractor app' grows 162% YoY, opens its doors for investors at a $100 minimum.
• Invest in time-tested solution that aims to solve this $600 billion women’s health problem at 80 cents per share.

In the most recent Berkshire Hathaway shareholder meeting, the topic came up again, with Mr. Buffett doubling down on his belief he could earn a 50% annual return, explaining his plans would be to "try and know everything about everything small."

However, for smaller investors interested in trying to achieve the astronomical returns Buffett says are possible, Buffett cautions investors to not just do it for the money, explaining "With a million dollars, you could earn 50% a year, but you have to be in love with the subject. You can't just be in love with the money; you really got to just find it like a biologist looks for something because they want to find something. It's built in."

Of course, that's not to say it'd be easy, likely explaining why Buffett still recommends investors buy passive funds that simply seek to track the market rather than funds run by active managers charging higher fees in an attempt to beat the market.

Trending: Invest like a millionaire. Exclusive opportunity to invest in Epic Games $17 billion gaming empire.

Outperformance for Warren Buffett's Berkshire Hathaway BRK remains difficult, due to its sheer size, with Buffett writing in his most recent shareholder letter that "We have no possibility of eye-popping performance" given that "There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others."

At the most recent Berkshire shareholder meeting, Buffett discussed his company's massive $189 billion of cash, saying, "I don’t think anyone sitting at this table has any idea how to use it effectively, and therefore we don’t use it."

With size commonly cited as an enemy of returns, one benefit of Berkshire's massive size and cash pile is its large margin of safety and the assurance that Berkshire could capitalize on any market panic.

While Buffett remains patient, one stock that Buffett consistently likes to buy is his own, with Berkshire buying back $2.56 billion of its shares in the first quarter alone.

Keep Reading:

• Amid the ongoing EV revolution, previously overlooked low-income communities now harbor a huge investment opportunity.
• Here is where your most successful angel investment may be hidden.