Historically, Buffett has argued for keeping large capital on hand to guarantee Berkshire Hathaway's capacity for quick and forceful response when prospects present themselves. From this vantage point, cash is a tool in the investment playbook for both defense and attack.
Apple once famously borrowed money to pay dividends to its shareholders, while it was sitting on mountains of cash parked in tax haven countries. In this view, companies hold excess cash largely to avoid having it taxed through repatriation.
Currently Berkshire has about 45% of its liquid asset in Equity Securities (Stocks), 53% in Cash and Cash Equivalents (Cash), and 3% in Fixed Maturity Securities (Bonds).
In an interview with The Wall Street journal, the 94-year-old billionaire stated that almost all of his remaining wealth will be directed to a new charitable trust. Buffet has reportedly been “planning for decades” for the handover — what happens with his company and his billions once he has passed away.
Despite being the sixth-richest person globally, Warren Buffett continues to drive a 2014 Cadillac XTS he purchased with hail damage. Although he can afford any luxury vehicle, Buffett prefers the practicality of his 10-year-old car.
Buffett recommended to the Board of Directors the amount of his compensation. Mr. Buffett's annual compensation has been $100,000 for more than 35 years and Mr. Buffett has advised the Committee that he would not expect or desire such compensation to increase in the future.”
Buffett worked with Christopher Webber on an animated series called "Secret Millionaires Club" with chief Andy Heyward of DiC Entertainment. The series features Buffett and Munger and teaches children healthy financial habits. Buffett was raised as a Presbyterian, but has since described himself as agnostic.
Warren Buffett's conglomerate Berkshire Hathaway currently holds more than $325 billion in cash and equivalents, according to the firm's quarterly financial statements, most of it in U.S. Treasury bills. Everyone wants to know why. Is he cashing out because he sees an unstable market priced too high?
According to Warren Buffett, selling Apple stocks made sense as Buffett believes stocks are trading above their intrinsic value and capital gains taxes are also likely to rise. This makes it advantageous to realize gains at the current lower tax rate as Buffett is trying to lock in profits before potential tax hikes.
Focus on your goals
Keep in mind that while cash may sometimes feel like the safest way to go, having too much cash may rob your portfolio of the potential higher returns associated with stocks and bonds, and it could slow progress toward your goals, especially when the economy and markets return to steadier growth.
Any excess cash is better used in different ways. In the case of Apple, it's investment in securities. These investments allow Apple to hedge against currency-related risks, and receive some revenue to keep up with inflation.
Yes, it's important to for investors to have cash on hand to meet spending needs and to provide a safety net for emergencies. And yes, an 85-year-old retiree should have a bigger cash allocation than a 25-year-old opening their first retirement account.
Conclusion: Warren Buffett's Frugal Lifestyle
His frugality extends beyond his personal life into his business decisions, echoing in his value investing strategy and his careful capital allocation.
In interviews previously, Warren Buffett has stated that he favors 3-month and 6-month Treasury bills as the place to park cash. These have been yielding as much as 5.40% in recent months but for simple math and to be conservative assume Berkshire is earning 5% annually.
Buffett's most commonly cited financial advice is as follows, “Rule №1: Never lose money. Rule №2: Never forget rule №1.” So, before investing, determine whether you can lose the money you're investing in.
Meanwhile, the company's immense size has made it increasingly difficult for Berkshire to replicate its tried-and-true model of deploying its profits to continuously beat the market. At last year's annual meeting, Buffett also suggested he would keep more cash on hand to prepare for higher capital gains taxes.
Buffett's choice to leave his fortune to his children, while staying true to his philanthropic values, reflects his approach to life, family, and legacy. For his kids, this isn't just about money—it's about carrying forward the values he's lived by: hard work, responsibility, and giving back.
Warren Buffett, CEO of Berkshire Hathaway, attends the 2019 annual shareholders meeting in Omaha, Nebraska, on May 3, 2019. There really is no such thing as a free lunch. An anonymous bidder paid a record-breaking $19 million for a private steak lunch with legendary investor Warren Buffett.
The world's richest person, Elon Musk, just announced that he's a “big believer in the principles of Christianity” and “a cultural Christian”. Musk's reasons are moral and political – he believes Christianity can boost both happiness and birthrates.
Bill Gates and Warren Buffett have been friends for over 30 years. After hitting it off in their first meeting, they worked together on philanthropy for decades.
Bill Gates and his ex-wife Melinda are Roman Catholic. They have said that religious morality is the inspiration for their charity work.
His measures include advanced security systems for his homes, personal security guards, a car with a defensive driver and cybersecurity measures.
Many are curious as to how the “Oracle of Omaha” amassed his spectacular wealth. Though the vast majority of his fortune he earned as a grown adult, there's reason to believe that some of what he learned (and what he values) about investing and work ethic stems from his first childhood job as a newspaper delivery boy.
At the Berkshire Hathaway 2021 annual meeting, executive vice chair Charlie Munger made an offhand remarking identifying Greg Abel as the successor to CEO Warren Buffett. Greg Abel is currently Berkshire's vice chair of Non-Insurance Business Operations and the chair of subsidiary Berkshire Energy Holdings.