Money

Warren Buffett's winning investing strategy can be applied to any purchase you make

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Warren Buffett knows a thing or two about choosing worthwhile investments.

When deciding whether or not to invest in a company, he and his partners follow a few simple guidelines. One of those is trying to determine the company's longevity.

"We sort of know it when we see it," Buffett said during the the Berkshire Hathaway 2017 Annual Shareholders Meeting. "It would tend to be a business that for one reason or another we can look out five or 10 or 20 years, and decide that the competitive advantage that it had at the present would last over that period."

Simply put, Buffett decides a business is worth investing in because it will last. He purchased See's Candies with longtime business partner Charlie Munger in 1972 and spent more than $1 billion on Coca-Cola stock in 1988 — both of which turned out to be good bets and both of which he still owns today.

Warren Buffett drinks several cans of Coke a day.
Contributor | Bloomberg | Getty Images
Warren Buffett drinks several cans of Coke a day.

"His approach is to be really sure of something before he buys it, and one of the ways he exercises that discipline is to sort of almost never sell. Not never sell, because he does sell stocks, but he sort of says to himself, 'I know I'm almost never going to sell it, I've really got to like it before I get into it," Buffett's biographer Roger Lowenstein, author of "Buffett: The Making of an American Capitalist," explained to Yahoo's Alexis Christoforous.

"It's not the not selling that makes these so good, it's that discipline to buy things only when he really, really likes them," Lowenstein says.

While not everyone will garner the same results as Buffett on the stock market, his core principle can be applied to almost every purchase we make: Invest for the long-term.

When deciding whether or not to buy a home, one of the first questions to ask yourself is: How long do I plan on staying here? The longer you live there, usually, the more valuable an investment real estate becomes.

"As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing," self-made millionaire David Bach writes in "The Automatic Millionaire." "Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!"

The same goes for clothing, appliances, furniture and anything else that you use on a daily basis. While it's tempting to skimp on the cheapest option in the moment — especially if you're on a tight budget — over time, nicer items will hold up better, making the initial outlay worth it.

Think of it in terms of cost per use. For example, say you invest in a $200 blazer from a high-end store. If it's a wardrobe staple and you wear it twice a week for the whole year, that's 104 days of wear. Divide the cost, $200, by the number of days, and you end up with less than $2.00 per wear. Not a bad deal, especially if you feel great in it.

Whether you're shopping for a new pair of jeans or in the market for a new car, apply the Buffett rule to your next purchase: Is this something worth holding onto?

If the Oracle of Omaha serves as any example, the discipline to buy things only when you really, really like them pays off.

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