Page 303 - Why We Want You To Be Rich - Donald Trump, Robert Kiyosaki.pdf

WHY Do You INVEST IN REAL ESTATE? I 297

How Many Ways Do You Get Rich?
~ Warren Buffett is famous for talking about the intrinsic value ofa stock.

I'
While many people parrot or mimic Mr. Buffett's words on intrinsic value,
very few people know what he really means. In this article, I will do my best
to explain intrinsic value, as simply as possible. Ifyou would like a more
sophisticated explanation, then you may want to read the plethora ofbooks
f, written about him and his methods ofinvesting.
f Once you understand intrinsic value, you may better understand why
some investors make much more money than others. You will also realize
that you can find intrinsic value in investments other than stocks. I will
explain intrinsic value using real estate as an example. Why do I use real
estate? Because real estate is more tangible than stock, meaning more people
will be able to understand intrinsic value.
When the average investor thinks about making money, he or she
usually thinks about buying low and selling high. For example, an investor
buys a stock for $10 and sells when and ifit reaches $20. He gets up every
day and checks the stock price.
Many investors are addicted to watching the market go up and down.
Their day gets offto a good start ifthe price goes up and to a bad start ifthe
price goes down. That is not what Warren Buffett does and neither do 1.
While the price ofan asset is important, it is not something we watch on a
dailybasis,as many investors do. Warren Buffett pays close attention to price
when he buys a business. After that, he really is not concerned if the share
price is going up or down. Nor does he care if the stock market isopened or
closed. He does not play the stock market, as most investors do.
~. First ofall,Warren Buffett does not just own stocks. He owns businesses.
Secondly, in very simple terms, what Mr. Buffett looks for in a business is a
well-managed business that will grow more valuable over time. He often
refers to business value compounding, in other words accelerating in value.

Shifting To Real Estate

r Let's shift to using real estate as an example, because I believe it may be
[ easier to explain intrinsic value from a real estate perspective.
l » " Two M EN ._g~~_E_S~~E _