Warren Buffett recommends this surprising strategy to protect against inflation


Inflation is still hot. The latest figures, published in early May, show an 8.3% increase in the consumer price index compared to the previous year. More concretely, higher grocery and gas bills can stretch your budget to its limits or beyond.

The investment community is abuzz over the best ways to manage inflation. Common advice is to invest in things that increase in value as prices rise, such as real estate, commodities, and Treasury inflation-protected securities (TIPS). Stocks can also offer longer-term protection, as they generally appreciate faster than inflation.

Investment inflation cannot touch

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

Image source: Getty Images.

At Berkshire Hathaway’s 2022 annual meeting of shareholders, Buffett had this to say about where to invest in these times of inflation: “So by far the best investment is anything that grows itself.” He also said, “Whatever your abilities are, they cannot be taken away from you, they cannot be inflated in you.”

This isn’t the first time that Buffett has defined skill development as an inflationary strategy. He shared the same advice in 2009 when the country was struggling to weather the Great Recession.

Alignment with your financial goals

Before jumping into an investment, it’s a good idea to check how well 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:

  1. How much capital do you need? You can look for options ranging from a graduate degree to attending a seminar. Consider the financial capital and the time you will have to invest.
  2. What is the expected return and timeline? If you’re looking for something quantifiable, like a higher salary, you can estimate the return on investment (ROI) of investing in your skills. But there is also value in less tangible outcomes, such as greater employability, protection against future layoffs, or improved job satisfaction.
  3. How does this investment fit into your overall portfolio? This may sound like a strange 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 do not follow financial markets can be particularly attractive (in small doses) because they are less likely to lose value in down markets. Your investment in yourself could be a great diversifier. Consider how additional education in your field could affect your financial security in good and bad economies.
  4. Does this investment correspond to your heritage objectives? If you want to buy a house next year, for example, you won’t quit your job and enroll in college. Choose a development strategy that does not disrupt the other milestones you are working towards. Or redefine your financial goals and timelines.

The best investment may not be traditional

According to Buffett, your skill set is an asset that inflation cannot touch. When looking for ways to deploy your money, consider investing in yourself as an option. Higher earning potential is a dividend that can fund future wealth opportunities.


Comments are closed.