Chasing higher interests rates to boost your return on principal is fine, as long as you don’t put your principal at risk of loss, notes Warren Buffett. It was a lesson that he learned the hard way when he made a mistake in investing in USAir preferred stock in 1989.
“It isn’t the return on principal that you care about,” Buffett said at the 1995 Berkshire Hathaway annual meeting. “It’s the return of principal.”
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© 2023 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.