Does Warren Buffett Invest In Bonds?
Written by
David Nadelle
Edited by
Nicholas Morine
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One of 93-year old investor and philanthropist Warren Buffett’s most endearing qualities is his humility. “Nothing extraordinary has occurred at Berkshire: a very long runway, simple and generally sound decisions, the American tailwind and compounding effects produced my current wealth,” Buffett said in a 2023 news release.
The nonagenarian CEO built his Berkshire wealth through long-term, stable investments in businesses that have strong brand recognition, loyal customers and excellent financials. Examples include Coca-Cola, American Express and GEICO Auto Insurance.
Buffett is best known for building wealth through stock investments (share ownership of a company that offers a greater potential for growth, despite certain risks). His primary focus and reputation have been made around his equity investments, so much so that many wonder if Buffett invests in bonds at all.
“It’s quite clear that stocks are cheaper than bonds,” Buffett said at an appearance back in 2010. “I can’t imagine anybody having bonds in their portfolio when they can own equities, a diversified group of equities.”
Does Warren Buffett Invest In Bonds?
Bonds, or debt securities, involve “lending” money to a company or organization who issues a bond, acting as a borrower to raise money from investors. Whether corporate, municipal or Treasury bonds, they provide a predictable income stream with little risk to investors.
When it comes to investing, Buffett loves the long game. The wealth of both Berkshire and Buffett has grown spectacularly by holding stocks for close to 30 years. Yet he believes in a 90/10 retirement allocation strategy, in which 90% of one’s money is invested in stock-based index funds, while the remaining 10% is invested in less risky investments like short-term government bonds.
It seems that Buffett has softened his stance. Berkshire Hathaway’s portfolio includes a significant amount of short-term bonds, despite its leader’s infamous public position.
Speaking to CNBC’s Becky Quick on Aug. 3, 2023, Buffett admitted: “Berkshire bought $10 billion in U.S. Treasurys last Monday. We bought $10 billion in Treasurys this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month.”
During 2023, Berkshire Hathaway capitalized on higher interest rates by shifting money into short-term government bonds. According to The Motley Fool, the conglomerate bought $29 billion in U.S. Treasury bills in the third quarter of 2023, growing its total investment to more than $126 billion.
Short-term T-bills are yielding more than longer-term bonds, giving Buffett and Berkshire a safe stockpile of money while they decide what to invest in next. For Buffett, stocks still rule his world — but his investment world is so vast that it pays to mix things up sometimes.
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