“Investment is most intelligent when it is most businesslike”
-From the “Intelligent Investor” by Benjamin Graham.
Warren Buffett uses this quote to begin his “Thoughts About Investing” in his latest annual letter to shareholders. It runs on pp 17-21. I encourage every investor to read and reread this section of the letter. If you read and absorb the lessons taught by Mr. Buffett you can’t help but become a wiser and (in the long-run) more prosperous investor.
This week let’s focus on the two non-stock investments that Mr. Buffett made, the farm in Nebraska and the rental property in Manhattan. In both cases, Mr. Buffett admitted that he had no specialized knowledge of either farming or real estate investment. He also looked at both as businesses not speculative investment. He purchased the farm in 1986 and has been there twice, even though it is only 50 miles north of his home in Omaha. He purchased the Manhattan rental building in 1993 and has never been to the property. Both investments operate as businesses and have provided reasonable gains. In other words, he made solid investments and let the free market work.
The most successful investors that I know–and work with–treat their investments as businesses. They don’t fret about the value of their investments day to day. The develop a well-thought out financial plan, select a diversified portfolio that has a reasonable chance to meet the goals of the plan, and let the free market work. They know that a businesslike approach to their investments is the surest path to long-term investment success.