Collection: Warren Buffett - #332 'The Best Investment You Can Ever Make'


Video Link: https://youtu.be/iDOsLFbjRc8


In this episode, Warren Buffett was asked whether he think an individual or a business owner in U.S. should be concerned about the purchasing power of his future dollar earnings or savings, and diversify his or her investments in non-dollar-based securities?


In this episode, you’ll learn:

  • What is the best investment you can ever make?

  • Why you should ignore asset allocation by categories?

  • The art of value investing.

To check out all Collection: Warren Buffett <click here>

 

[Transcript]

(Source: https://buffett.cnbc.com/2005-berkshire-hathaway-annual-meeting/)

~ Please visit the site above for full video of Berkshire Hathaway Annual Meeting.

AUDIENCE MEMBER 00:00

My question is related to the issue of U.S. trade deficit again and its implications on the future value of the dollar.


Do you think an individual or a business owner here in U.S. should be concerned about the purchasing power of his future dollar earnings or savings, and diversify his or her investments in non-dollar-based securities?


WARREN BUFFETT 00:22

I think it’s very tough for individuals to either select individual stocks, select individual times to enter the market, select currencies.


I mean, I just think that’s a game that they tend to get interested in at the wrong time. There’s some adverse selection, in terms of when people who do not follow stocks carefully get interested in stocks.


I think that, you know, the best investment you can have, for most people, is in your own abilities.


I mean, when I talk to students, you know, I would pay a student — in many cases, I would be glad to, you know, pay them $100,000, cash up front, for 10 percent of all their future earnings.


So, I’m willing to pay 100,000 for 10 percent of them, I’m valuing the whole person at a million dollars, just capital value standing there in front of me.


And those — anything you do to develop your own abilities is probably going to be — or your own business — is probably going to be more productive for you than starting to think about individually making commitments into foreign exchange.


If you have a good business in this country earning money in dollars, you’ll do ok. I mean, you may live in a world 20 years from now where a couple percent of the GDP is going to service the debts and the ownership that we’ve created now by running these deficits.


But you’ll do fine in America. So, I wouldn’t worry about that much.


Charlie?


CHARLIE MUNGER 02:04

Well, if you look at Berkshire, you will find that it really doesn’t do much of conventional asset allocation to categories.


We are looking for opportunities and we don’t much care what category they’re in, and we certainly don’t want to have our search for opportunities governed by some predetermined artificial bunch of categories.


In this sense, we’re totally out of step with modern investment management, but we think they’re wrong.


WARREN BUFFETT 02:37

Yeah. And incidentally, we have 80 percent of our money, or more — well over 80 percent — tied to this country and to the dollar. So it’s not like, you know, we’ve left the country or anything of the sort.


CHARLIE MUNGER 02:53

When have you done a big asset allocation strategy?


WARREN BUFFETT 02:57

Never.


CHARLIE MUNGER 02:58

Yeah.


WARREN BUFFETT 02:59

Yeah.


We end up with peculiar asset mixes. I mean, if the junk bond thing had gone on a little longer, instead of having 7 billion in there, we might have had 30 billion in.


But we were doing that simply based on the fact that it was screaming at us.


And we do the same thing with equities. I mean, back — for many years, we had more than the net worth of Berkshire in equity positions. But they were cheap.


CHARLIE MUNGER 03:23

And I want you to remember one of my favorite sayings as you do this asset allocation. “If a thing’s not worth doing at all, it’s not worth doing well.” (Laughter)


WARREN BUFFETT 03:36

You can see why Ben Franklin turned the mantle over to Charlie. (Laughter)

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