Why Warren Buffett holds only 1% of his wealth in cash
- 23rd March 2021
- Posted by: Hakeem
- Category: Billionaire Watch
The popular assertion, “cash is king” has been discounted by Warren Buffet, the world’s most powerful investor, as he currently keeps only 1% of his wealth holdings in cash.
Buffett, who is presently the CEO, Chairman and largest shareholder of Berkshire Hathaway, and estimated to be worth $95.8 billion, keeps about $1.03 billion in cash (1% of his net wealth).
The 90-year-old, self-made billionaire known for his high frugality spoke against the rationality of holding cash instead of purchasing stocks.
“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 worthless over time. But good businesses are going to become worth more overtime,” Buffett said.
The billionaire leads Berkshire Hathaway, the world’s most valuable multinational conglomerate holding company known for holding a multitude of businesses.
Berkshire Hathaway, wholly owns GEICO, Fruit of the Loom, Helzberg Diamonds, Pampered Chef, Forest River, Duracell, Dairy Queen, BNSF, Lubrizol, Long & Foster, FlightSafety International, and NetJets, and owns minority stakes in public companies that include Apple, Bank of America, Kraft Heinz Company, American Express, and The Coca-Cola Company.
Currently, the multinational conglomerate’s stock is the world’s most expensive equity asset to buy as it currently trades at $380,402.80 and has appreciated about 48% in the past year,
According to a July 2020 stock exchange filing, the majority of the nonagenarian billionaire’s fortune is derived from a 15% economic interest in Berkshire Hathaway, a publicly-listed investment company.
Warren Buffett’s current net worth of $95.8 billion can buy about 54.6 million troy ounces of gold or 1.49 billion barrels of crude oil.
What this means: Most wealthy investors including, successful tech entrepreneurs, fashion icons, and leading hedge fund managers would rather invest most of their funds in assets like stocks, real estate businesses, debt instruments, and lately crypto than hold a significant amount of cash in the bank because many banks offer unimpressive interest rates.
In addition, cash is often exposed to inflation, and in some cases depreciate in value faster than financial assets like gold, Bitcoin.
However, it’s key to note that members of the world’s elite class keep a significant amount of cash primarily in case they need it for buying or investing in future assets.