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While some investors may believe that the ability to spot good opportunities and conduct precise valuation calculations are the most important skills they need, that’s not necessarily the case.
Instead, legendary investor Warren Buffett argues that having the right temperament is actually a more valuable trait for investment success.
“The proper attitude toward investing is much more important than any technical skills,” he told Andy Serwer, during an interview with Yahoo Finance.
For Buffett, this means sticking to his tried-and-true principles: be greedy when others are fearful, and play the long game.
Here’s why Buffett believes investment psychology and having the right perspective are so critical.
The right perspective for an investor, according to Buffett, is that of a business owner — when you buy a stock, you’re buying a piece of a business. Therefore, the underlying operation of said business is the most foremost factor.
“In my view, what you do when you’re buying a business is [assume] that you’re not going to get a quote on it for five years,” he said in the Yahoo Finance interview. “They’re going to close the stock market for five years and you’ll be happy owning it as a business.”
Buffett added, “If you owned Coca-Cola in 1920, it didn’t make a difference whether it went public. The important thing is what it was doing with customers.”
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Buffett’s focus on the underlying fundamentals is a key aspect of his approach, and has been echoed by other successful investors, such as Peter Lynch.
“The key organ in your body in the stock market is the stomach, not the brain,” he quipped during a speech at the National Press Club in 1994.
So, how can this insight help make you rich?
Read more: Nervous about the stock market? Gain potential quarterly income through this $1B private real estate fund — even if you’re not a millionaire. Here’s how to get started with as little as $10
Investors can act like Buffett with a few perspective shifts.
One, avoid panic-selling during market downturns. This could help you benefit from the recovery — and cheaper valuations — that emerge in these situations.
Two, expand your time horizon. According to eToro’s Ben Laidler, the average stock holding period has dropped from five years in the 1970s to just 10 months in the 2020s.
However, holding a stock for just one year had a 25.2% probability of loss, according to Wealthfront’s data. The probability of loss dropped to 4.9% if the stock was held for 10 years, and 0% if it was held for 20.
Buffett encourages investors to ignore daily stock price fluctuations and think of stocks as more like illiquid assets — such as farmland and real estate — in order to resist the temptation of buying or selling based on short-term sentiments.
If you’ve got the mindset — and the guts — to be a long-term investor, buying into real estate and land is the way to go.
Platforms like First National Realty Partners (FNRP) let you take advantage of the sector with professionally-vetted deals.
FNRP gives you access to necessity-based real estate — such as grocery stores or health care facilities. That means the properties are essential to the local community, often leased by national brands like Kroger and WalMart, and likely to remain desirable.
The best part is, they manage the whole process, from sourcing top properties to dealing with tenants, so you can focus on finding your next lucrative deal.
If you have a smaller budget for investing, you can still get a foot in the door in the real estate game — for as little as $100.
Arrived allows you to invest in shares of rental homes and vacation rentals without taking on the responsibilities of property management or homeownership.
On their platform you can browse a curated selection of homes, each vetted for their appreciation and income potential. Once you find a property you like, simply choose the number of shares you want to buy and start investing.
Buffett isn’t the only billionaire to see value in investing in land and properties. Estimates show that Microsoft founder Bill Gates owns around 270,000 acres of farmland around the United States.
Over the past seven years Gates has reportedly spent roughly $113 million purchasing Nebraska farmland and now owns about 20,000 acres in that state alone.
Farmland is an attractive investment for those looking to hedge against inflationary periods.
According to a 2023 article from Nasdaq, the value of farmland has been shown to rise alongside inflation, with the value of U.S. farmland hitting 10.2% in 2022 at a time when the average inflation rate was 8%.
The thing about investing in physical farmland is the price tags associated with large farms (or even small to medium-sized farms) can be massive. These are also assets that aren’t as easy to get financing for, particularly for investors and those without direct farming expertise.
Enter FarmTogether, a company offering a range of funds and bespoke investment opportunities for investors looking to put some capital to work in physical farmland.
With more than $2.1 billion in capital deployed and a conservative and disciplined investment philosophy, the company hits on many of the key needs of investors looking for exposure to this asset class.
The company’s proprietary sourcing technology and experienced team with best-in-class partnerships means that less than 1% of the deals that enter the company’s pipeline are passed onto investors.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.