‘It’s not taxed at all’: Warren Buffett says this is the ‘best investment’ you can make when battling hot inflation — and it doesn’t have to cost you a dime
‘It’s not taxed at all’: Warren Buffett says this is the ‘best investment’ you can make when battling hot inflation — and it doesn’t have to cost you a dime
Warren Buffett is the sixth richest person in the world — behind Elon Musk, Bernard Arnault, Jeff Bezos, Larry Ellison and Bill Gates — with an estimated net worth of around $118 billion, according to the Bloomberg Billionaires Index.
Unlike some of his billionaire contemporaries, the Berkshire Hathaway CEO seems to enjoy living a simple life, and his strategies for smart investing and amassing wealth don’t sound overly complicated — even during times of inflation.
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While very few people share Buffett’s investing prowess, the billionaire believes it’s still possible to protect yourself against inflation if you follow one of his core philosophies.
“The best thing you can do is to be exceptionally good at something,” he said during last year’s Berkshire Hathaway annual shareholders meeting. “[People] are going to give you some of what they produce in exchange for what you deliver.”
Skills are inflation-proof
Buffett says you can mitigate the impacts of inflation by focusing on continuous self-improvement and staying on top of the game in your chosen field.
“Whatever abilities you have can’t be taken away from you. They can’t be inflated away from you,” he said. “The best investment by far is anything that develops yourself, and it’s not taxed at all.”
That could mean getting a college degree, completing training courses, working with a mentor or simply reading more and educating yourself about different cultures, languages, innovations and so on.
The 92-year-old says you don’t need to go out of your way chasing skills that don’t serve you well, especially in these tricky inflationary times. Instead, he says, you should aim to do everyday things exceptionally well. For instance, he thinks strong communication is one of the most important skills out there.
“One easy way to become worth at least 50% more than you are now … is to hone your communications skills,” he previously said in a video posted on LinkedIn.
“If you can’t communicate, it’s like winking at a girl in the dark — nothing happens. You can have all the brainpower in the world, but you have to be able to transmit it, and the transmission is communication.”
Of course, surviving through inflationary times requires a little more than just strong communication skills. Once you’ve invested in yourself, you may want to consider investing in some of these other popular hedges against inflation.
Real estate
Real estate is generally a “good investment” during times of inflation, according to Buffett.
He explained: “They’re the businesses that you buy once and then you don’t have to keep making capital investments subsequently … so, you do not face the problem of continuous reinvestments involving greater and greater dollars because of inflation.
“If you built your house 55-years-ago like Charlie [Munger] did, or built one 55-years-ago like I did, it’s a one time outlay … and you get an inflationary expansion in replacement capital without having to replace yourself.”
If you want your real estate portfolio to grow beyond your home, you can invest in a residential real estate investment trust (REIT). REITs are publicly traded. They collect rent from tenants and pass that rent on to shareholders in the form of dividends.
Consider also using an online crowdfunding platform. These allow investors to pool their money together to buy property (or a share of property) as a group.
If you don’t want the pressure of making investment decisions yourself, investing apps and online platforms can help you invest in diversified real estate portfolios in ways that will seek to maximize your returns while keeping your fees low.
Stocks pricing power
Buffett has been around the block a few times — experiencing many highs and lows in the U.S. economy. He managed a stock portfolio through periods of double-digit inflation rates in the 1970s and has plenty of advice on what to own when consumer prices spike.
In a letter to Berkshire Hathaway shareholders in 1981, the business juggernaut highlighted two characteristics that make a business well adapted to an inflationary environment: 1) an ability to increase prices easily, and 2) an ability to take on more business without having to spend too much in order to do it.
Buffett likes high quality businesses with low capital needs — like Apple (AAPL). Apple boasts some impressive financial metrics — testament to the company’s efficiency, strength, and negotiating power — which have enabled it to thrive during this period of inflation.
The tech giant now ranks as Berkshire Hathaway’s largest stock holding at $177.6 billion as of June 30, 2023, making up over 45% of the conglomerate’s entire portfolio.
“Our criteria for Apple was different than the other businesses we own,” Buffett said at the 2023 Berkshire Hathaway annual meeting. “It just happens to be [a] better business than any we own.”
Gold
While Buffett is known for being uninterested in gold investing — describing it in a 2011 letter to shareholders as an asset “that will never produce anything” — other money mavens consider it to be a solid hedge against inflation because its purchasing power has remained relatively stable over time.
Buffett’s Berkshire even owned roughly 21 million shares of gold miner Barrick Gold (GOLD) a couple of years back.
“The worth of a dollar can be weakened by inflation, but gold provides you with an edge to combat that decrease in purchasing power,” William Bevins, CFP, CTFA, told CBS News.
Investing apps can also help you invest in the commodity by purchasing shares of gold mining companies on the stock market. For those looking for more diverse exposure, you can also invest in gold exchange-traded funds.
You may also want to consider opening a gold IRA, an individual retirement account that allows you to invest in precious metals in physical forms, like coins, instead of stocks, mutual funds and other traditional investments.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
