Warren Buffet's Investment with Coca Cola

All of you must have at least tried once this popular refreshment that can be seen pretty much everywhere you look and it is non-other than Coca-Cola. It can be seen in all fast food outlets around the globe and has become an all-time favorite.

Coca-Cola Company was first founded by John Stith Pemberton in the late 19th century. It was then bought by Asa Grigs Candler and through his amazing marketing strategies, Coca-Cola managed to dominate the market until today.

Coca-Cola got its name based on two key ingredients which are Coca, a type of leaf named Coca and Cola, a type of bean which contains caffeine. Nevertheless, the true secret ingredient of Coca-Cola has never been revealed and many attempts have been made to duplicate the taste but all to no avail.

The big story behind all this is the investments in Coca-Cola that have been made by the most popular investor in this decade, Warren Buffet.

The biggest move made by Warren Buffet himself was when he invested $1 Billion into Coca-Cola in 1988 even though the stock market in 1987 crash. It can be seen that the investment move made by Warren Buffet somehow connected to Benjamin Graham. Warren Buffet believed that the company was still undervalued.

The cost per share at that time was only $2.45 per share compared to now which is nearly 30x more.
So let's say that you made a $1000 USD investment into Coca-Cola back then, your shares would be worth $23664 USD. Just imagine how much Warren Buffet make considering he invested $1 billion USD.

Why did Warren Buffet Do This?

Well, here's why and we can see it today. The CEO of Coca-Cola is James Quincey and his annual salary is $10 million USD whereas Warren Buffet and his investment firm (Berkshire Hathaway) invested into Coca-Cola and he managed to rake in $592 million USD in dividends in the year 2017.
If you can see the comparison between James Quincey who has to work hard day and night to ensure that Coca-Cola will always strive and managed to compete with other companies out there. His salary is considered Active Income since he has to work in order to get paid.

In Contrast, Warren Buffet and his investment firm is the investor. They use their personal capital to invest in Coca-Cola to reap in the benefits each year from the dividends which gave him $592 million USD.

His income is classified as Passive Income since he did not work or sell for Coca-Cola apart from simply investing his own money.

How much are they taxed?

They are both taxed differently in the United States and the differences are rather profound.

In the United States, they have a rather high-income tax which is 45%. Therefore, James Quincey who has worked very hard for his income of $10 million USD will be taxed $4.5 million USD and left with only $5.5 million USD.

Whereas, Warren Buffet is taxed differently since the money is gained through dividends instead and is taxed only 20%. Thus, he is left with $477 million USD.

You can see the huge difference between becoming an investor like Warren Buffet and becoming a hard worker like James Quincey. Becoming an investor seems to be more lucrative but also comes with a risk of losing it all.

It is crucial for you to get financial help before pursuing the path as an investor but who knows that one day, you might become the new Warren Buffet. Knowledge is what makes a person in power and control of what will happen in the future.

Let this story inspire you to become the best investor of all time.

Do you think you can be an investor just like Warren Buffet?

Also read: Jeff Bezos vs Bill Gates, Which Individual is Far Greater?

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