Warren Buffett Recommends This Surprising Strategy to Protect Against Inflation

Inflation is still running hot. The latest numbers, released in early May, show an 8.3% increase in the Consumer Price Index vs. the prior year. More practically, higher grocery and gas bills may be stretching your budget to, or past, its limits.

The investing community is abuzz about the best ways to manage inflation. Common advice involves investing in things that increase in value as prices rise, such as real estate, commodities, and Treasury Inflation-Protected Securities (TIPS). Stocks can offer longer-term protection, too, since they generally appreciate faster than inflation.

The investment inflation can’t touch

But one famous investor has a different perspective. That investor is Warren Buffett, chairman and CEO of Berkshire Hathaway. Buffett, considered one of the world’s most successful investors, has a proven track record of building wealth.

Image source: Getty Images.

During Berkshire Hathaway’s 2022 annual shareholder meeting, Buffett had this to say about where to invest in these inflationary times: “So, the best investment by far is anything that develops yourself.” He also said, “whatever abilities you have can’t be taken away from you, they can’t actually be inflated away from you.”

This isn’t the first time Buffett has framed skills development as an inflation strategy. He shared the same advice in 2009 when the country was struggling to move past the Great Recession.

Aligning with your financial goals

Before moving on any investment, it’s smart to check in on how the opportunity aligns with your financial goals and strategy. Investing in yourself — through education and training — is no exception. Here are some questions you can ask:

How much capital do you need? You could research options ranging from an advanced degree to attending a seminar. Consider the financial capital and the time you’ll have to invest.
What is the expected return and timeline? If you’re after something quantifiable, like a higher salary, you could estimate the return on investment (ROI) of investing in your skills. But there’s also value in less concrete outcomes, like greater employability, protection against future layoffs, or improved job satisfaction.
How does this investment fit into your overall portfolio? This might seem like an odd question to ask about investing in your career, but hear me out. When you buy securities, you choose assets that behave differently to manage volatility. Investments that don’t move in lockstep with the financial markets can be particularly attractive (in small doses) because they are less likely to lose value in bear markets. Your investment in yourself could be a nice diversification Consider how the added training in your field might affect your financial security in good economies and bad ones.
Does this investment align with your wealth goals? If you want to buy a home next year, for example, you wouldn’t quit your job and enroll in college. Choose a development strategy that doesn’t upset other milestones you’re working toward. Or reprioritize your financial goals and their timelines.

The best investment may not be a traditional one

According to Buffett, your skill set is an asset inflation can’t touch. When you’re looking at ways to deploy your cash, consider investing in yourself as one option. Higher income potential is a dividend that can fund compounding wealth opportunities down the road.

10 stocks we like better than Walmart
When our award-winning analyst team has an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Walmart wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

Stock Advisor returns as of 2/14/21

Catherine Brock has no position in any of the stocks mentioned. The Motley Fool recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts