These are the two best ways to hedge against inflation according to Warren Buffett

Warren Buffett Inflation

Consumer prices are soaring to their decade-long highs in the US, stoking fears that inflation could wreak havoc on the economy. Although some economists say that the current rate of inflation is not a cause for concern, many investors are wondering how to react and protect their savings. And legendary investor Warren Buffett has an answer: There are two things people can do to hedge against prices.

Warren Buffett Inflation Tips

In 2009, at the end of the Great Recession, the Oracle of Omaha told Berkshire Hathaway’s annual shareholders meeting that the best thing a person can do to hedge against inflation is to improve their skills and work to become the leader in their business. countryside. “If you are the best teacher, if you are the best surgeon, if you are the best lawyer, you will get the salary you deserve, regardless of what the coin is worth,” said the investor. Ultimately, “the best thing to do is invest in yourself,” says Buffett.

The other best option to hedge against inflation, says Buffett, is to own shares in “a wonderful business.” No matter what happens to the value of the dollar, a company whose products are in constant demand will see the value of its shares grow by whatever it takes to maintain its real price.

He gives his own investments as an example: “If you have Coca-Cola shares, you will get, in dollars, a part of people’s work in 20 years and in 50 years, regardless of the nominal amount they have to pay. No matter what happens with the price level, “because people will continue to pay for the products they like.

But rather than choosing just one company to invest in, Buffett prefers low-cost index funds, which are much less risky. The Oracle has been recommending for years that investors put their money in these funds, which keep all stocks in an index, which automatically diversifies them. The S&P 500, for example, includes big-name companies like Apple, Coca-Cola, and Alphabet (Google).

“Constantly buy a low-cost S&P 500 index fund,” Buffett told CNBC in 2017. “Keep buying it through thick and thin, and especially through good times.” In his opinion, “there is never a bad time” to invest in these products.