In a previous article we took a look at Warren Buffett’s definition of “the very best businesses.”

Buffett says you want to find businesses that earn a high return on tangible assets and grow. Those are the best businesses to own because they compound invested capital over time.

Compounding comes down to rate of return and time.

All things being equal, the higher your rate of return, the better. And the longer you earn that rate of return, the better.

Buffett puts it this way:

“You know, if you buy good businesses at reasonable prices and hold them, you're going to make a lot of money, and that's true of stocks as a group; that's true of individual companies.”

It really is that simple.

The difficulty, usually, lies in the "at reasonable prices" and "hold them" details.