Mazor'sEdge

Warren Buffett, the legendary investor, has long cautioned against two common investment pitfalls: misunderstanding one’s investment and using borrowed money to leverage it. Combining these mistakes, he warns, often leads to disastrous outcomes.

“Any time you combine ignorance and borrowed money, you can get some pretty interesting consequences,” Buffett remarked during the 1994 Berkshire Hathaway Annual Meeting. He highlighted the historical risks of excessive borrowing, noting that “the ability to borrow enormous amounts of money combined with a chance to get either very rich or very poor very quickly has historically been a recipe for trouble at some point.”

Buffett’s advice serves as a timeless reminder for investors to thoroughly understand their investments and approach leverage with extreme caution.

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2025 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway and BYD, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Gold is often touted as a reliable inflation hedge and a valuable investment, but should it be part of your portfolio? Legendary investor Warren Buffett remains skeptical, favoring productive assets like stocks over commodities such as gold.

In 2012, Buffett compared the performance of gold to Berkshire Hathaway, highlighting a stark contrast. When Berkshire was first acquired, gold was priced at $20 per ounce, while Berkshire shares were $15 each. By 2012, gold had risen to $1,600, but Berkshire’s A shares soared to $120,000. Nearly a decade later, gold stood at $1,798, while Berkshire shares surpassed $443,000.

For Buffett, the distinction lies in earning power. “It’s very hard for an unproductive investment to beat productive investments over any period of time,” he said at Berkshire Hathaway’s 2012 Annual Meeting. He predicted that over 50 years, not only would Berkshire outperform gold, but common stocks and even farmland would likely generate better returns.

Buffett’s insights suggest that productive, income-generating assets typically offer greater long-term growth than commodities that rely purely on price action.

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2025 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

For some investors, the rise of “meme stocks,” sky-high valuations on unprofitable companies, and other speculative behaviors signal a need to leave the market or adopt more conservative strategies. Warren Buffett, however, sees these trends as nothing new. Long before the meme stock era, Buffett observed speculation as a recurring part of the market, one that doesn’t influence his approach.

“We’re trying to find wonderful businesses,” Buffett remarked. “The fact that a part of the market is kind of screwy, that’s unimportant to us.” He and his partner Charlie Munger have seen countless cases of overpriced stocks, misleading promotions, and unsustainable promises. As Buffett said in 1996, “It always will go on. And it doesn’t make any difference to us.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2024 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Gold is often hailed as a reliable inflation hedge, but Warren Buffett has long challenged this view, emphasizing his preference for productive assets over non-productive ones like gold. Speaking at the 2005 Berkshire Hathaway Annual Meeting, Buffett highlighted why he believes gold’s utility as an investment is overrated.

“Historically, people saw gold as a refuge from declining currency value,” Buffett said. “But so is a barrel of oil, an acre of land, or a piece of Coca-Cola. Assets that serve a real purpose, like See’s Candy, will retain value regardless of the currency’s condition. If the dollar loses half its value, we’d simply sell See’s Candy for double the price and maintain the same real value.”

Buffett contrasted the tangible utility of productive businesses with gold, which he sees as speculative and lacking intrinsic value. Reflecting on his father’s enthusiasm for gold in the 1940s, Buffett noted that while gold prices rose from $35 an ounce to over $400 in 65 years, the compounded returns, after storage and insurance costs, were unimpressive.

For Buffett, the key lies in owning assets that produce goods or services people will always need, regardless of economic conditions. “We wouldn’t trade ownership of productive assets for a hunk of yellow metal,” he concluded.

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2024 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.