Warren Buffett is legendary as an investor, but he’s also an incredibly successful businessperson, too—a fact that sometimes gets lost in the millions of words that have been written about his advice on how to buy a stock.
That advice can be summarized with a just a few words. Appearing on the CNBC-produced syndicated program “On the Money” last month, Buffett said, “If you own your stocks as an investment—just like you’d own an apartment, house or a farm—look at them as a business.”
Using that viewpoint, you shouldn’t buy a stock simply because you think it will go up in price sometime soon. Instead, you should buy a piece of a business that you think will generate profits for a long time to come.
That long-term perspective is also at the core of the business advice that Buffett has provided over the years.
Here are some examples from his annual letters to Berkshire Hathaway shareholders.
4. Keep costs low. In his 1996 letter, Buffett wrote that being a “low-cost operator” is directly responsible for the success of Berkshire’s GEICO auto insurance subsidiary. “Low costs permit low prices, and low prices attract and retain good policyholders.” And when those customers recommend GEICO to their friends, the company gets an “enormous savings in acquisition expenses, and that makes our costs still lower.”
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