When a magician performs a trick that astounds the audience, most people ask, "How did he do it?" I think that's a relevant question for what Warren Buffett has accomplished so far in 2025.

Most investors have seen their portfolios decline significantly this year. Buffett is a notable exception. His net worth has increased by billions of dollars. How did he do it? Here are three key reasons Buffett is making money hand over fist while the stock market flounders -- and how you could too.

Image source: The Motley Fool.

1. Berkshire's tariff-resistant businesses

The stock market's gyrations -- both up and down -- have a simple cause: President Trump's tariffs. Investors worried that steep tariffs would diminish the future earnings of many companies. Any delay in the tariffs raised hopes that the situation might be better than feared.

However, Buffett's Berkshire Hathaway (BRK.A 0.17%) (BRK.B -0.12%) didn't succumb to the market meltdown. Shares of the conglomerate are up close to 17% as of this writing. How did Berkshire manage to deliver such a strong performance while the overall market plunged? One reason is that much of its revenue is generated by tariff-resistant businesses.

In 2024, nearly 24% of Berkshire's total revenue stemmed from its insurance companies, including GEICO and General Reinsurance. In addition, roughly 6% of total revenue came from interest, dividends, and other investment income. Nearly 6% of total revenue came from the conglomerate's energy and utilities operations. Tariffs have minimal impact on these businesses, while some of Berkshire's other units should fare relatively well even with steep tariffs in place.

2. A highly diversified portfolio

Around 47% of Berkshire's net earnings last year came from its investment gains. Investors have arguably been attracted to Buffett's stock this year in part due to its highly diversified investment portfolio.

Buffett has notably increased the diversification of Berkshire's portfolio over the last couple of years. In particular, he reduced the conglomerate's stake in Apple. Although the iPhone maker remains Berkshire's top holding, it makes up a much smaller percentage of the total portfolio than it has in the past.

Berkshire has also been helped in 2025 because it's heavily invested in several stocks that are widely viewed as safe havens. The Coca-Cola Company especially stands out in this regard. Coke ranks as the third-largest holding in Berkshire's portfolio. Its share price has jumped around 16% year to date.

However, Buffett's biggest winner this year is a stock his late business partner, Charlie Munger, especially loved: Chinese electric vehicle maker BYD. This hot stock has skyrocketed 45% year to date.

3. A massive cash stockpile

Finally, Buffett has built a massive cash stockpile. At the end of 2024, Berkshire Hathaway's cash, cash equivalents, and short-term investments in U.S. Treasury bills totaled $334.2 billion. That's the largest cash position in Berkshire's history.

BRK.B Cash and Short Term Investments (Quarterly) data by YCharts

Buffett doesn't prefer to have such a high level of cash. However, he hasn't been able to find stocks to buy that meet his stringent criteria (notably including an attractive valuation based on earnings growth prospects). Investors realize that this massive cash stockpile puts Buffett in an enviable position to scoop up shares of great businesses at a discount if the stock market declines further.

Takeaways for other investors

Could you make money hand over fist in the current volatile market, too? I think so -- if you learn the right lessons from Buffett.

One key takeaway from how Buffett has been such a big winner this year is that he is heavily invested in tariff-resistant businesses. This could be a smart strategy for other investors to follow.

Another important lesson from Buffett is that his portfolio is well-diversified even with most of his fortune invested in only one stock, Berkshire Hathaway. This is due to Berkshire's built-in diversification as a conglomerate. Constructing a diversified portfolio is always a wise move for investors. That's especially true when there's so much uncertainty in the market.

You won't be able to amass a cash stockpile like Buffett and Berkshire have. However, having plenty of cash on hand could pay off over the long run when great stocks become available at attractive valuations.

There isn't a big secret to how Buffett has been so successful as the market floundered this year. Anyone can follow what he has done and potentially reap seemingly magical returns.