Warren Buffett has had a remarkable track record of making timely and smart investment choices. And while most of his advice to investors revolves around the super-simp leways you can get solid returns, one very important piece of advice from Buffett is often overlooked. There is one long-term investment option that the Oracle warns should never be in your portfolio: a hoard of cash.
In a recent report from Bankrate, a survey of Americans found that cash was the favorite long-term investment option for funds that were available for 10 years, with 26% of the respondents choosing cash investments. Only real estate came close to matching the popularity of cash, with 23% of people choosing that option for their hypothetical investment. Stocks came in fourth (after gold and other precious metals), at 12%.
Unfortunately for the majority of those surveyed, and the portion of the nation’s population that they represent, cash is a very poor investment choice. Here’s Mr. Buffett on the subject:
“The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Cash is going to become worth less over time… Cash is a bad investment over time.”
The King is dead
If you look at the long-term returns of cash versus other investment options, you’ll see why Buffett thinks it’s the worst investment you could choose: