Why Warren Buffett avoid investing in gold while other billionaires do - VnExpress International (2024)

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Why Warren Buffett avoid investing in gold while other billionaires do - VnExpress International? ›

He noted that buyers of gold do so with the expectation that someone else will pay more for it in the future. Buffett emphasized that investing in stocks or cropland would yield a plentiful harvest of crops and substantial dividends over the years, whereas an ounce of gold would still be an ounce of gold.

Buffett therefore doesn't see any utility in owning gold because it can't produce things. Stocks can grow earnings and profits and pay dividends, and farmland produces fruits and vegetables that can be used and sold, but gold just sits there, waiting for someone to come along and decide to pay more for it.

Price volatility: The price of gold can be volatile, and it may fluctuate significantly over short periods. This can make it difficult to predict its value and can make it a risky investment.

“Be fearful when others are greedy and greedy when others are fearful.” This highlights Buffett's contrarian approach to investing. He often takes advantage of market panics and crashes to buy companies at a discount, knowing that their value will eventually recover.

Physical assets fit the bill in providing status and something that's in their possession and control. Gold isn't the only tangible investment that's popular with the ultra-wealthy. They often choose property, art, and land alongside precious metals.

Gold can be a good investment option in specific situations, such as when inflation is high. During these scenarios, gold can outperform the stock market. However, gold is typically a poor investment option when the economy is strong.

Warren Buffett bought an approximate stake of US$565 million in Barrick Gold (TSX:ABX)(NYSE:ABX) in Q2 2020. As the Berkshire Hathaway's 13F filing revealed this Tuesday, he had exited the gold position altogether by the end of 2020. US$565 million is a lot of money to most people.

Investing in gold comes with several disadvantages. Physical gold does not generate passive income or dividends, leading investors to rely solely on price appreciation. Additionally, owning gold incurs storage and insurance costs.

Silver is more affordable than gold, making it an accessible way to diversify your investments. It's also widely used in industries, which means its value has the potential to grow based on market demand. Platinum's value comes from its rarity and industrial use, particularly in automotive manufacturing.

Of course it is possible; it has been done before and governments in times of stress simply change the laws. As you can see above, gold bullion was forced to be sold to the government in 1933.

What are the 5 golden rules of investing? ›

They are: (1) Use specialist products; (2) Diversify manager research risk; (3) Diversify investment styles; and, (4) Rebalance to asset mix policy. All boringly straightforward and logical.

Buffett's Two Lists is a productivity, prioritisation and focusing approach where you write down your top 25 goals; circle your 5 highest priorities; then focus on those 5 while 'avoiding at all costs' doing anything on the remaining 20.

Some of the most trustworthy and well-known gold dealers include JM Bullion, American Precious Metals Exchange (APMEX) and American Hartford Gold.

And like all gold investments, 1-ounce bars can serve as a hedge against inflation. That means buying in now, while inflation remains high, could deliver big benefits.

Put very simply, investors gravitate to gold during recessions because it is a safe harbor. If investors are worried about currencies being devalued via loose monetary policy, gold provides an alternative option.

The substantial Sprott investment is believed to highlight Mr Burry's confidence in the commodity as a hedge against economic uncertainty. The maverick investor is well-known for his ability to accurately predict the economic cycle.

Buying and managing real estate is more of a business than it is an investment, and Buffett knows that his time is better spent choosing companies to invest in than it is running a real estate business.

Buffett — who proudly eats like a six-year-old — has even bought McDonald's stock: Berkshire held a 4.3% stake in the company worth $1.4 billion at the end of 1996.

But the main reason Berkshire doesn't pay dividends is that Buffett is confident in his ability to allocate capital in a more profitable way. Even if Buffett thinks he can't make effective use of his cash reserves, he will choose a buyback plan to return capital to shareholders rather than dividends.