This is a multi part article. For the previous article, you can read here: What we can learn from Warren Buffett? Part 2.
Treat the investment as a business
Unlike many investors, Warren Buffett sees his stocks as businesses. To him, it is possible to get a bargain by buying small pieces of businesses than the entire business itself. He ignores the market fluctuation since anything can happen to the stock market. He gave the analogy of buying a house for say $20,000. If someone comes up to you with a price of $15,000, it does not make sense to sell the house just because someone quotes a lower price. Yet, this is how many investors react - they sell their stock when the stock prices go down because they do not see their stock as business. What is a business? A business is an asset that is productive. Overtime, it delivers income to its owners. A non-productive asset, such as bitcoin and gold, does not produce anything. All an investor can hope is to sell the asset to the next investor at a higher price who thinks can sell the asset at an even higher price to some other guy.
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As a financial adviser, it is my job to advice my clients not to look at the price return over a short-term period. This is hard. In the age of technology, we can now know the prices of the market and stock at every second. Yet, looking at the prices in this manner is not investing. It is just watching some random numbers provided by Mr. Market. If you treat investing as a business, you should not be asking what is the price today or even ask the question, “How is the market today?”.
In the next article, I will provide another reason why Warren Buffett is so successful.
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