Warren Buffett says this 1 key investing ability is 'much more important than any technical skills' — here's what it is and how it can make you rich

Attitude determines success

The right perspective for an investor, according to Buffett, is that of a business owner — as opposed to a trader.

In other words, it’s important to remember that, 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 — not the price someone else is willing to pay to buy or sell that piece.

“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.”

He 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. And you probably would have been better off if there wasn’t a market… for 30 or 40 years because you wouldn’t have been tempted to sell it then.”

This focus on the underlying fundamentals is a key aspect of Buffett’s 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 key insight help make you rich?

Invest in real estate without the headache of being a landlord

Imagine owning a portfolio of thousands of well-managed single family rentals or a collection of cutting-edge industrial warehouses. You can now gain access to a $1B portfolio of income-producing real estate assets designed to deliver long-term growth from the comforts of your couch.

The best part? You don’t have to be a millionaire and can start investing in minutes.

Learn More

Gaining an edge

Investors can gain an advantage over others with a few adjustments to their attitude toward the market.

For instance, avoid panic-selling during market downturns. This could help you benefit from the recovery — and cheaper valuations — that emerge in these situations.

Some of the most profitable days on the stock market have followed sharp downturns, according to an analysis by Lazard Asset Management. Investors who have the stomach to sit through these sharp downturns may experience better performance overall.

Expanding your time horizon could be another way to gain an edge. 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.

In other words, holding for longer than a year is above average now.

Laidler’s analysis also revealed that a longer holding period reduced the probability of a loss.

Holding a stock for just one year had a 25.2% probability of loss, according to Wealthfront’s data.

However, the probability of loss dropped to 4.9% if the stock was held for 10 years. If it was held for 20 years, it drops entirely down to 0% probaility of loss.

Buffett encourages investors to ignore daily stock price fluctuations and think of stocks as more like illiquid assets — such as farms and real estate — in order to resist the temptation of buying or selling based on short-term sentiments.