Invest in the business, not in the stock

I'm investing in a stock to make money, not in a business This is a common view on D-Street. And many investors too will never pause a moment to think about the business of the company they are willing to bet their money on. Many will just put their money where their brokers, friends and associates will tip them to. All without ever thinking about the businesses of their investments. But no investment - however attractive the entry point - can outperform the underlying business, especially in the long term. This is one truth that escapes most investors. Busting the Myth Every investor who has been active in the market for some time knows that Buffett is a very successful stock picker - so successful that he is more or less a permanent fixture on the list of the top 3 richest men in the US. But the admiration for Buffett just stops there. Investors do not realise that Buffett is not just a successful stock picker but rather a more successful business buyer. And his success has more to do with the wonderful businesses that he owns rather than their stock price movement. Here's what Charlie Munger has to say about how important it is to pick high quality businesses: "We've really made the money out of high quality businesses... Over the long-term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6 per cent on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6 per cent return - even if you originally buy it at a huge

This article was originally published on July 07, 2020.