With each passing day, investors fear more and more that inflation will persist. Messages from major central banks that the price boom is temporary and a consequence of the necessary economic recovery after suffering from the pandemic are starting to fade due to the stubbornness of the inflationary data, which does not stop.
The inter-annual CPI in July was 2.9% in Spain, 2.2% in the euro-zone and 5.4% in the US. Given this outlook, investors are looking for ways to invest their savings to avoid a loss of purchasing power and, given the low interest rates, traditional bank deposits are not an option.
But investment guru Warren Buffett taught savers how to act in a situation like the one we’re going through today. When asked about this, he warned at Berkshire Hathaway’s 2015 annual general meeting of the need to rely on recognized brands, properties and funds that track the major indices.
“The best companies during inflation are those that you buy once and then stop investing,” such as utilities. These types of companies, constantly having to invest capital, consume “more and more money” as they lose purchasing power due to inflation and need more and more funds to purchase the goods.
For this reason, he prefers to use brands that are popular with consumers, as he will continue to buy the brand’s products despite the price boom.
According to the same logic, the “Oracle of Omaha” recommends buying real estate. On the one hand, they are associated with a one-off expense for the purchaser, on the other hand, when selling this asset, the price of inflation can be passed on to the selling price, which may have been beyond the revaluation of the house or the premises. .
Still, Buffett previously advised small investors to invest their money in low-cost index funds, which already represent significant diversification and largely cover the boom in the cost of living. So far this year the Ibex 35 has grown by more than 10%, the German Dax by 15%, the EuroStoxx 50 by 17% and the S&P 500 by 18%.