Warren Buffett Reveals His Greatest Money-Making Lesson

Warren Buffett's most recently interview received a ton of attention. But one of his most important comments went widely unnoticed.

Apr 5, 2014 at 1:35PM

Buffett Homeservicesamerica

Source: homeserviceamerica.

There were so many gems in Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) Chairman Warren Buffett's most recent interview with CNBC, something was sure to get missed. 

In the midst of discussing topics ranging from politics to Bitcoin, Buffett was asked if investors should be fearful of events in China and the Ukraine. To which he replied, "I didn't sell my farm yesterday... I didn't sell my property down at NYU... so why should I sell my businesses?" 

My businesses
He wasn't talking about Berkshire Hathaway, or GEICO; Buffett was referring to his stock holdings. This may not seem particularly surprising, given that Buffett has made similar comments hundreds of times in the past. To think of stocks as businesses rather than pieces of paper, however, is something that I've never heard said quite like that.

There are literally millions of small-business owners in the United States. People who have put their blood, sweat, and tears into creating something they love. If someone walked by their company every day and said, "Today I think this company is worth [enter price here]." Would they panic and sell because they're being offered a low price? Of course not. 

When you begin to think like Buffett, that you're building your own conglomeration of companies, it starts to change your perspective. You'll stop worrying about one-year returns, and start focusing on how you can create an empire of great businesses, your businesses. 

Why is this so important?
People Buy At The Wrong Time

As the chart above shows, from 2000 to 2010 money flowed into mutual funds when the market was high and then investors sold off when the market was at its lowest point: taking losses and never allowing the market to work for them. The simple fix is to buy and hold, and be confident in the businesses you own.

Buffett said during the interview, "This country will come through anything... the farms don't go away, the productive capacity doesn't go away, human ingenuity doesn't go away." You need to ask yourself if you have that kind of faith in American business. Because if there's a part of you that believes the stock market, or the U.S. economy, is just a house of cards that's bound to fall apart, you'll never feel good about your investments.

The motion of the stock market will always create emotion. It's up to you to decide what that emotion is. For Buffett, seeing the stock market fall might portend even more joy when the market inevitably rallies. Because he has faith business will grow over time. So, falling stock prices just means a greater discount.

Change your thinking, change your results
We need to stop acting like shareholders and start feeling like confident business owners. Act as if you're Warren Buffett: make your investments with an intensity, read the company filings, get to know management, and put in the time. Because when you understand and believe in the business you're buying, you'll stick with them over time. And I am sure you'll improve your outcomes.

That, in my opinion, is one of Warren Buffett's greatest lessons.

More wisdom from Buffett
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Dave Koppenheffer has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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