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Words of Wisdom From Warren Buffett

Should you buy gold? Invest in stocks, or bonds? Leave your kids an inheritance? America's most successful investor has the answers

On Investing in Gold

Gold is a huge favorite of investors who fear almost all other assets, especially paper money. But what motivates most gold purchasers is their belief that the ranks of the fearful will grow.

The world's gold stock is 170,000 metric tons. If all of the gold were melded together, it would form a 68-foot cube — and fit in a baseball infield. At $1,750 per ounce — gold's price as I write this [in 2012] — its value would be $9.6 trillion. Call this cube pile A. Now create pile B. For $9.6 trillion, we could buy all U.S. cropland (400 million acres producing $200 billion annually), plus 16 ExxonMobils (the world's most profitable company, earning more than $40 billion annually). And we'd still have $1 trillion left over. Can you imagine an investor selecting pile A over pile B? [Gold has since plunged more than 20 percent.]

On Investing in America

Investors need to avoid the negatives of buying fads, crummy companies and timing the market. ... [For most investors] buying an index fund over a long period of time makes the most sense. Just make sure you own a piece of American business.

Whether the currency a century from now is based on gold, shark teeth or a piece of paper, our country's businesses will continue to deliver goods and services. These commercial "cows" will live for centuries, and proceeds from the sale of their "milk" will compound for the cows' owners — just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well).

On Retiring

I will keep working until about five years after I die. I've given my board of directors a Ouija board so they can keep in touch. I also have a letter that will go out and tell what the plans of the company are. It starts out, "Yesterday I died." I just hope the stock doesn't go up too much that day.

Adapted from Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012: A FORTUNE Magazine Book, edited by Carol J. Loomis

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Video Extra

THE 2013 BILLIONAIRES LIST: Forbes magazine has uncovered a record 1,426 billionaires, 200 more than in 2012, worth a total of $5.4 trillion. The average net worth of a Forbes billionaire: $3.8 billion.

 

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