How To Invest During Inflation The Warren Buffett Way

Learn How To Invest During Inflation according to the world’s best investor, Warren Buffett.

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How To Invest During Inflation like Warren Buffett

Warren Buffett, also known as the Oracle of Omaha, is quite literally the best-known investor the world has ever seen. Along with Charlie Munger, his investment firm Berkshire Hathaway has consistently made wise investment choices and beat Wall Street and the indices. He has a sage like understanding of Economics, investment assets and how to make long term real returns.

In addition to that, the nonagenarian cut his teeth during The Great Depression and has witnessed many booms and busts in economic and business cycles in his decades of successful investing, and he has navigated them all without incident.

In fact, he has played these cycles with such savvy confidence that he profited immensely during periods when the majority of investors were stashing money away, too scared to enter the stock market for fear of even bigger losses than they had already had to take.

Warren Buffett however saw these periods as huge opportunities to go shopping and scoop up value stocks that had been dragged down by circumstances that don’t truly affect their core business operations in the real world.

So when we are hearing Economists talking about interest rate hikes to curb inflation, many people would be very wise to initially seek advice from, arguably, the best investor ever.

For more on how to Defensive Trade during inflation, check out our post: What Is Inflation? [And Why You Should Care].

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How To Invest During Inflation

Check out the following points on how to invest during inflation the Warren Buffett. In the many interviews that Warren has given over the years, during a variety of economic conditions, and he says the following business do well during periods of inflation:

1. How to Invest During Inflation – You Need a Moat.

Ability to increase prices easily without fear of market loss or unit volume therefore passing on the additional cost of Inflation onto the consumer.

In order to do this, the company needs a moat. Think about Apple: an iPhone. Back in 2016 a new iPhone was worth $600.00. By 2021 the new iPhone 13 price is $799.00 USD and up to $1,099.00 for the Max Pro. That’s not to mention the constant stream of add-ons that the company can illicit from its customers by way of the iTunes music subscription, the additional iCloud storage and so on and so forth.

Coca-Cola is another great example on this point. Imagine you are now required to pay $1.20 for a can of coke instead of $1.00. Because it is such a unique product and so widely consumed worldwide by so many people, generally speaking, most people would pay this additional price because they still want the product.

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2. How to Invest During Inflation – Make More Money.

The ability to increase large dollar volume in business with only minor additional investment of capital.

For this example, you could consider a company like Facebook. Facebook tends to make its money through advertising to its plethora of users. A simple and easy for Facebook to be able to increase its revenue without necessarily having to spend any money in order to do so would be so simply increase the rate at which paid ads are shown to the end users.

At the moment when using the platform a user usually sees one or two ads per 10 or 20 unpaid posts in a feed, however, this could easily be increased to 1 to 5 and more users would be seeing more ads and therefore clicking through more and generating more income for Facebook without them having to spend much additional capital.

3. How to Invest During Inflation – Invest in Yourself.

Warren Buffett once stated when asked directly what is the best way to invest during periods of high inflation.

Inflation is an invisible tax, that only one man in a million understands. It is the trap of someone who had faith in their currency. The best way to defend yourself against inflation is to increase your earning capacity by way of increasing your talents.

That means, you are making yourself more valuable. Understandably, this can really only be done by though education and experience in a professional area, or, by starting a so-called side hustle such as an online business, freelancing in an area that you are proficient, or even building up a social media account which you may into a revenue stream. You might even write that book that you have been thinking about for years!

No matter what solution you chose to pursue, the objective is the same. Generate additional funds to that you have available capital in order to offset the effects of inflation or even better, take advantage of the investment opportunities that are present during a time of inflation.

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Summary of How To Invest During Inflation – The Warren Buffett Way

So there we have it. The Warren Buffett way of how to invest during inflation periods in the economic cycle. Firstly, find companies that have a moat. Secondly, find companies that can increase their revenue without significantly increasing their expenditure. And lastly, up-skill or diversify how you earn money yourself so that you can try to increase your personal earnings in line with inflation and reduce the overall effects that it has on your disposable income.

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As always, if you have any questions, we would love to hear from you. Please contact us. Happy trading!

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