Thinking about buying gold? This is what Warren Buffett thinks about.
Possibly one of the greatest investors of all times, Warren Buffet prefers to invest stocks.
Nevertheless, that is not the only way he is willing to put his money to work for him.
Buffett has already commented on bonds, gold, cash, real state, index funds and cryptocurrencies. Here is some of what he´s said about gold.
Why would you invest in gold?
Gold is not only an investment that can rise in value over time, but it can also be used to hedge against inflation.
With that in mind, many investors add gold to their investments as a way to diversity their portfolio.
Although gold in itself does not generate any value, throughout millennia it has been used as a safe way to store value.
Warren Buffet on gold
In his 2011 letter to Berkshire Hathaway shareholders, Buffett pointed out that gold is a “huge favorite of investors who fear almost all other assets, especially paper money.”
Warren pointed out that gold is a unproductive asset, in the sense that it will never produce anything of value.
The second shortcoming pointed out by the great investor is that there is not many much practical use to the metal.
What should you do?
Warren Buffet has some fair points on gold. The metal is unproductive and lacks practical use.
Golds value lays in the fact that people perceives it as valuable.
Although not a great investment, gold can play it´s part in a well rounded portfolio.
Gold can be especially useful against inflation and it generally holds value better than stocks during severe crashes.
A diversified portfolio should contain a multitude of non correlated investment classes and gold can be one of them, albeit in small amounts.