Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, has some advice for battling inflation: Focus on improving your talents. With U.S. inflation hitting 40-year highs, Buffett says honing your abilities is “the best investment by far” and one that “is not taxed at all.”
The sixth-richest person globally, Buffett has a net worth of around $118 billion, per Bloomberg. But the 92-year-old lives modestly and eschews complexity when offering tips on amassing wealth, even during inflationary times.
“Whatever abilities you have can’t be taken away from you. They can’t be inflated away from you,” Buffett said at Berkshire’s 2022 shareholder meeting. “The best investment by far is anything that develops yourself, and it’s not taxed at all.”
Develop In-Demand Skills
Buffett’s advice is to hone your skills in high demand fields. He says you don’t need to learn totally new abilities. Just focus on excelling at everyday skills that serve you well, especially as inflation persists.
For example, Buffett thinks strong communication is one of the most vital abilities now. Sharpening your communication skills, he says, can make you 50% more valuable immediately.
Technical skills are also worthwhile. Learning digital marketing, coding, data analysis and other tech-focused skills can ready you for high-paying remote jobs. With a talent shortage in these fields, developing these abilities can protect your livelihood.
Consider learning a second language as well, especially Spanish or Mandarin. The bilingual advantage is significant in business, opening up more opportunities.
The key is choosing skills that are relevant, transferable and evergreen. Focus on talents that build on your strengths and align with your interests. The payoff of becoming exceptionally skilled is protection from inflation’s toll.
Real Estate Still Hedges Inflation
While Buffett advocates developing your abilities first and foremost, he has other tips for navigating inflation too. Real estate, for one, is usually a strong hedge, Buffett notes.
Homes and other properties are “good inflation hedge[s] because they’re bought on a one-time basis,” Buffett told shareholders in 1981. You lock in the price upfront without ongoing capital costs.
Investing in real estate beyond your residence can also work. You can buy REITs or use crowdfunding platforms to invest at scale. Or utilize rental property apps for easy, diversified exposure minus landlord duties.
Just beware risks like rising interest rates, which make mortgages costlier. Do your due diligence before buying real estate now.
Favor Stocks with Pricing Power
Equities are trickier during inflation, but Buffett emphasizes choosing companies with “pricing power.” Firms that can easily raise prices and handle more demand without overspending have an edge.
High quality companies with economic moats and veteran leaders tend to have the most pricing power. Focus on proven winners rather than speculating on unproven upstarts.
Gold Offers Some Protection
Buffett may dislike gold as an asset that “will never produce anything.” But other experts consider the precious metal an inflation hedge since its buying power is relatively stable.
“Gold provides you with an edge to combat [inflation’s] decrease in purchasing power,” says William Bevins, CFP.
You can buy physical gold bars or coins or invest in gold stocks, funds and IRAs. This diversifies your portfolio beyond just stocks and bonds.
But gold comes with risks too, like fluctuating prices. Do your homework before betting on the shiny metal as an inflation fix.
With U.S. inflation still painfully high, Warren Buffett says developing your talents is the surest way to protect yourself. Communicating effectively, learning digital skills and honing other high-demand abilities can ready you for today’s job market.
Buffett also recommends real estate and stocks with pricing power as decent hedges against inflation now. Plus gold offers some appeal, though Buffett is no major fan.
But avoiding speculation and focusing on improving your earning power is Buffett’s top tip. As he says: “The best investment by far is anything that develops yourself, and it’s not taxed at all.”
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