The Business Owner

Before the late twentieth century, most wealthy individuals did not build or hold wealth in diversified portfolios of thousands of stocks and bonds, but rather, in a very small handful of farms, ships, or other privately held and intimately known investments. This chapter explores an investment viewpoint at the opposite extreme from that of broadly diversified index funds, based on a 1996 quote from legendary investor Warren Buffett on how a portfolio of just three wonderful businesses can be better and safer than a more diversified portfolio of one hundred “average” businesses. As in centuries past, this approach to investing will likely remain that of the few rather than of the many, but should still challenge many investors to know more about each asset they own.