Bonds are Among Most Dangerous Assets: Warren Buffett

Here is a piece of advice from one of the world’s wealthiest person. Warren Buffett, the billionaire chairman and CEO of Berkshire Hathaway, says that bonds are one of the most dangerous assets on inflation risk. He notices that over the past century these debt instruments have destroyed the purchasing power of bond holders in many countries, even though they continue to receive timely payments of principal and interest.

Buffett suggests investors not to buy bonds or hold any other assets that are tied to currencies. Buffett in his annual letter to shareholders that appeared recently on Fortune magazine’s website says that highest interest rates can compensate investors for the inflation risk, and this kind of interest rates were mostly seen in early 1980s. However, current rates do not come close to offset the purchasing power risk.

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