Buffett’s simple test — and the assets that pass with flying colors
In a 2018 interview with Yahoo Finance, Buffett explained that there are two types of things people buy: one qualifies as a real investment — the other, not so much.
The test to tell the difference is simple: if trading were banned for a period of time, would the asset still hold up?
“If you buy something — a farm, an apartment house or an interest in a business — and look to the asset itself to determine whether you’ve done something, what the farm produces, what the business earns, and so on, you don’t really care whether the stock market’s open,” Buffett said. “You look at the investment itself to deliver the return to you.”
Simply put, the kinds of assets Buffett sees as real investments produce returns on their own. They don’t need an open market — or a future buyer — to be worthwhile.
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 MoreRental real estate
Buffett has often pointed to real estate — especially rental properties — as a textbook example of a productive, income-generating investment.
In 2022, Buffett remarked that if you offered him “1% of all the apartment houses in the country” for $25 billion, he would “write you a check.”
Why? Because regardless of what’s happening in the broader economy, people still need a place to live and apartments can consistently produce rent money.
The best part? You don’t need to be a billionaire investor to tap into that income stream. Crowdfunding platforms like Arrived have made it easier for average Americans to invest in rental properties without the need for a hefty down payment or the burden of property management.
With Arrived, you can invest in shares of rental homes with as little as $100, all without the hassle of mowing lawns, fixing leaky faucets or handling difficult tenants.
The process is simple: browse a curated selection of homes that have been vetted for their appreciation and income potential. Once you find a property you like, select the number of shares you’d like to purchase and then sit back as you start receiving rental income deposits from your investment.
Another option is First National Realty Partners (FNRP), which allows accredited investors to diversify their portfolio through grocery-anchored commercial properties, without taking on the responsibilities of being a landlord.
With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to Triple Net (NNN) leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns.
Simply answer a few questions — including how much you would like to invest — to start browsing their full list of available properties.
‘Interest in a business’ — and Buffett’s favorite investment for everyday Americans
Buffett says that when you buy an “interest in a business” and focus on what the business earns — rather than daily market moves — “you don’t really care whether the stock market’s open.” And it’s no surprise he feels that way.
His company, Berkshire Hathaway, has delivered staggering returns over the decades — through bull and bear markets — by owning stakes in high-quality, cash-generating businesses.
But of course, not all businesses are created equal — so how do you pick the right ones?
Buffett’s solution is refreshingly simple: own an S&P 500 index fund. These funds offer broad exposure to the S&P 500 — the top companies listed on U.S. stock exchanges.
Such a straightforward approach gives investors instant diversification without the need for constant monitoring or active trading.
“In my view, for most people, the best thing to do is own the S&P 500 index fund,” Buffett famously stated.
The beauty of this approach is its accessibility — anyone, regardless of wealth, can take advantage of it. Even small amounts can grow over time with tools like Acorns, a popular app that automatically invests your spare change.
Signing up for Acorns takes just minutes: link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio. With Acorns, you can invest in an S&P 500 ETF with as little as $5 — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey.
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