'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 | Canada News Media
‘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 down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
