Yaël Bizouati-Kennedy
·3 min read
Berkshire Hathaway’s chairman Warren Buffett, one of the world’s most famed investors, is still faithful to the idea that holding steady, being patient and believing in the power of value investing is key to successful investments.
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Many investors analyze and revere his investment advice, which is not surprising. At 93, his fortune stands at $119 billion, according to the Bloomberg Billionaires Index. Further, Berkshire Hathaway has delivered a 19.8% compounded annual gain in market value since 1965.
Just as important to Buffett’s investment strategy, though, are the investments he doesn’t believe in. Here are but a few of the investment types that the Oracle of Omaha would rather not waste money on.
Stocks
Buffett has famously said, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” He shared and explained that thoughtin his 1996 letter to Berkshire Hathaway shareholders, noting that, “your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whoseearnings are virtually certain to be materially higher 5, 10 and 20 years from now. Over time, you will find only a few companies that meet these standards — so when you see one that qualifies, you should buy a meaningful amount of stock.”
Gold
Buffett is also uninterested in gold. In his 2011 letter to shareholders, he noted that gold has two significant shortcomings, “being neither of much use nor procreative.”
“If you own one ounce of gold for an eternity, you will still own one ounce at its end. What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As ‘bandwagon’ investors join any party, they create their own truth — for a while,” he wrote, noting that a temporary ‘gold rush’ for gold is not an indicator of actual, reliable value.
Bitcoin
Buffett is also not a fan of Bitcoin, as he has rather forcefully reiterated on several occasions.
Buffett, talking at the Berkshire Hathaway 2022 shareholder meeting, said that, “if you … owned all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it. Because what would I do with it? I’ll have to sell it back to you one way or another. It isn’t going to do anything.”
He also argued that the appeal of Bitcoin is akin to a type of “magic” that draws investors.
“Whether it goes up or down in the next year or five years or 10 years, I don’t know. But one thing I’m sure of is that it doesn’t multiply, it doesn’t produce anything,” he said at the time, according to CNBC. “It’s got a magic to it, and people have attached magic to lots of things.”
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When tracing the arc of Buffett’s incredible investment success, it can be just as valuable to understand what he avoids as it is to know what he embraces and chooses to invest in. Avoiding the above investment types has been but one of the many sharp investment decisions Buffett has made on his path to incredible wealth and financial security.
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This article originally appeared on GOBankingRates.com: Warren Buffett: 3 Investments He Won’t Waste Money On
