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Highlights
- Inflation negatively impacts the returns on stock investments.
- Similarly, debt investors also feel the pinch of hot inflation.
- Legendary investor Warren Buffett recently shared a unique advice for beating inflation.
Rising costs raise concerns among stock market investors as inflation bears a negative impact on their returns on investments. Similarly, debt investors also feel the pinch as central banks resort to interest rate hikes to counter rising consumer prices, which brings down bond prices. A rise in both interest rate and yields implies falling prices and a lower principal value for the fixed-income investment. So, surging inflation can inflict pain on investors.
However, legendary investor Warren Buffett has a unique advice for beating inflation. Unlike other experts who focus on techniques such as diversification and hedging, Berkshire Hathaway’s Chief Executive Officer (CEO) and Chairman calls for investing in yourself in such a challenging scenario.
In a reply to a query at Berkshire Hathaway’s shareholder meeting on 1 May 2022 in Omaha, Nebraska, Buffett advised the audience to improve their skills and work to be the best in their respective fields. "The best thing you can do is to be exceptionally good at something,” Buffett was reported as saying in media. People will always pay for an excellent doctor, or singer, or baseball player, he added.
Stressing on the significance of investing in one’s skills, the Oracle of Omaha said, "Whatever abilities you have can't be taken away from you. They can't actually be inflated away from you. So, the best investment by far is anything that develops yourself, and it's not taxed at all."
Buffett also said that skills are inflation-proof unlike a currency. "If you have a skill that is in demand, it will remain in demand regardless of the value of the dollar," he noted.
Berkshire Hathaway's 2022 AGM
Berkshire Hathaway conducted a five-hour-long Q&A session with shareholders during the company’s annual general meeting (AGM) for 2022. During the session, the shareholders asked direct questions to Buffett and Vice Chairman Charlie Munger.
Meanwhile, in the first quarter of calendar year 2022, the firm led by Buffett turned out to be the largest net stock buyer in the last fourteen years. Berkshire spent US$51 billion on stocks in Q1CY22, and its cash stake fell over USS$40 billion to US$106 billion. The conglomerate made sizable investments in Chevron, HP, Occidental, Activision Blizzard, and Alleghany. Berkshire's first-quarter operating profit was almost unchanged at US$7.04 billion.
Berkshire stake in Occidental
Berkshire disclosed its huge common equity stake in Occidental as one of the biggest purchases made by the company in the first quarter. It was on top of the US$10 billion, which had already been invested in the oil producer some years ago.
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