Warren Buffet Explains Why Stocks Are Better Than Gold and Bonds

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Posted by Elizabeth Retton

Warren Buffett, the CEO of Berkshire Hathaway, is a longtime respected business mogul and philanthropist who undoubtedly catches our attention whenever he is featured in the press. And while there could be dozens of reasons why, the top one is most likely due to the fact that when he speaks, therein lies some consequential value for us all.

So when he was featured in Forbes Magazine to share why he believes that stocks are far better investments, in his opinion, than gold or bonds, people took note. And notes. Because aside from his reputation and resume, many would agree with his sentiment that while “In God We Trust” may be printed on our bills, it’s been the human hand that has been running how those bills are spent, or misspent, since the beginning of time.

As he explored the subject of what he considers to be a wise investment, he spoke on the fact that while investments into bonds and money-market accounts may seem safe, they also tend to come with lots of potential risks. The government has the last say and ultimate control of such things and based on their ever-transitioning policies, inflation may increase and that affects money (gold’s) worth and value. Case in point, here are some hard gold facts: in 1965, the U.S. dollar was worth about what now takes around seven dollars to purchase. The numbers game that investors have to pay to keep up is like a hamster wheel, at best. Plus, while gold is used for spending, it’s not something that it, within itself, incurs productivity. People invest in it simply with the hope that it will, someday, increase in value. This is a main reason behind why he’s “for companies” and not really “for gold”.

An illustration used is that the current price of gold (at the time of this article), according to the world’s gold stock, would equate to the value of about roughly $9.6 trillion. The pause here is that, again, gold is limited when it comes to its production capabilities; it is incapable of multiplying itself. He placed that scenario into one section.

In another, he addressed that for that same amount, we could purchase about 400 million acres of gold old American soil and 16 of the world’s most remunerative companies (that would be Exxon, by the way) and be left with somewhere around $1 trillion. Over time (perhaps not our lifetime, but definitely within our children’s), that land can be used to produce (and sell) a myriad of resources. And the oil? Well, we know that tends to be a sure thing. A wise investor would probably go with the latter.

And so would Mr. Buffett. People will always work. People will always eat. Resources like electronics and lumber will probably always be high in demand. Yet, the gold will not have changed. Oh, but what you could have made from what you was produced on that land is immeasurable. And by purchasing stocks based on those resources, therein lies amazing profit potential.

That is the extremely oversimplified version of his eloquent presentation, but it provides you with enough ABCs to start building your own case for what makes more sense to you: gold or stocks. Don’t just assume that safe is what’s best. Do your research. Get enlightened on what are real investment risks.

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