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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers