Investments to Protect Yourself from Inflation: A Guide by Warren Buffet

Are you worried about the impact of inflation on your investments? You’re not alone. As prices continue to rise, many investors are looking for ways to protect themselves from the negative effects of inflation. Fortunately, legendary investor Warren Buffet has some great advice to help you do just that.

Table of Contents

Worst Investments in Inflationary Times

Currency-denominated assets: In an inflationary environment, currency is the worst asset you can own. If you keep your money in a bank account or under your mattress, its value will be eaten away by inflation over time. Therefore, it is advisable to avoid holding dollars in your portfolio when inflation is expected.
Bonds: Bonds issued by governments or corporations with coupons in the inflated currency will have a difficult time too. Inflation in the dollar can significantly reduce the returns from a bond. Hence, bonds are not the ideal investment for an inflationary period.

Unproductive Assets

Unproductive assets: These include assets such as art, a house, gold, and other unproductive assets. They should keep their real value over time, but they won’t increase your purchasing power, which is why they are not higher up on the list.

The Best Investments in Inflationary Times

Productive Assets: These include assets such as businesses, real estate, and commodities such as oil and gas, which can generate income and appreciate in value over time. For example, a rental property can generate rental income, which can increase over time, while the property’s value appreciates as well.
High-quality stocks: Finally, the best investments to own during times of inflation are high-quality stocks in strong, stable companies that have a history of increasing their dividends over time. These stocks can provide a hedge against inflation and increase your purchasing power over time.

Conclusion

Inflation can be a challenging environment for investors, but it doesn’t have to be a disaster. By following the advice of Warren Buffet and investing in productive assets and high-quality stocks, you can protect your portfolio and even increase your purchasing power over time. Remember, the key is to invest in assets that will appreciate in value and generate income over time, rather than assets that are likely to lose value as inflation rises. With these tips in mind, you’ll be well on your way to building a portfolio that can weather the storm of inflation and provide you with long-term financial security.

TL;DR

Currency-denominated assets are the worst assets to own during an inflationary period.
Bonds with coupons in the inflated currency will have a difficult time during inflation.
Unproductive assets will not increase your purchasing power, which is why they are not higher up on the list.
Productive assets, such as businesses, real estate, and commodities such as oil and gas, can generate income and appreciate in value over time.
High-quality stocks in strong, stable companies that have a history of increasing their dividends over time can provide a hedge against inflation and increase your purchasing power over time.
It is advisable to invest in assets that will appreciate in value and generate income over time rather than assets that are likely to lose value as inflation rises.