Warren Buffett Doesn’t Invest in Gold, You Should

Warren Buffett has expressed his dislike for gold many times. However, the precious metal has been outperforming other asset classes this year.

Mohit Oberoi, CFA - Author

Sep. 4 2020, Updated 6:52 a.m. ET

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  • Warren Buffett, Berkshire Hathaway’s (NYSE:BRK.B) chairman, has expressed his dislike for gold many times. However, the precious metal has been outperforming other asset classes this year amid the stock market crash.
  • While Warren Buffett has a distaste for gold, investors should have some allocation towards gold in their portfolios.
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Warren Buffett

The current crisis has brought the world to a standstill. COVID-19 is a health and financial crisis. Notably, the scale of lockdowns to control the virus is unprecedented. Although US equity markets fell last month, they have recovered somewhat. When the stock markets started to crash in February, Warren Buffett advocated long-term investing. On several occasions, Buffett has expressed his disdain for gold as an investment. He highlighted how equity markets outperform gold over the long term.

Gold shines as stock markets crash

Even though Warren Buffett will turn 90 this August, he can talk about long-term investing and advise against gold (NYSEARCA:GLD) as well as debt. There’s no denying that over long periods, equities would invariably outperform debt and gold. However, we also need to look at asset allocation. For retail investors, it’s never advisable to put all of the money into equities, which holds especially true if your investment horizon is lower.

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Warren Buffett versus Ray Dalio

Gold tends to outperform in crisis situations. Gold outperformed equities by a wide margin during the Great Financial Crisis. So far, gold has outperformed this year as well. Having defensive assets like gold and debt help limit the impact of the stock market crash on our portfolio. Also, with asset allocation, you can achieve better risk-adjusted returns. While Warren Buffett doesn’t like gold, some of the other fund managers, like Ray Dalio, advocate putting some money into gold.

Should you invest in gold amid the stock market crash?

Incidentally, Ray Dalio correctly predicted the Great Financial Crisis. He has been warning about a recession and a stock market crash for the last several quarters. Other fund managers also warned about a crash for the last few years. However, the current turmoil is a black swan event. No one expected a virus to hit the global economy.

Coming back to Warren Buffett, the legendary investor wouldn’t lose sleep if the markets crash even more. However, not many investors can have a similar temperament. It’s always advisable to diversify your investments across different asset classes including gold.


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