The Daily Buffett

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The Illusion of Safety

August 6th

Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.

Warren Buffett

At first glance, holding onto cash or cash equivalents offers a sense of security. But this immediate comfort ignores the bigger picture, the long-term scenario where cash equivalents are doomed to depreciate.

The illusion of stability that cash equivalents provide is a dangerous comfort zone for investors. It seems like a safe refuge against the volatile nature of markets, but in reality, it's a ticking time bomb, gradually eating away at potential wealth as it depreciates over time.

Conversely, the practice of long-term, value investing may seem daunting. It requires patience and a keen eye for undervalued assets that hold inherent worth. These investments may not create immediate excitement or provide an immediate sense of security, but they are designed to weather the market's turbulence and offer substantial returns over time.

So, we should avoid the illusion of safety inherent in cash equivalents and embrace the potential long-term rewards of value investing. Because in investing, as in life, it's often the harder path that leads to the greatest rewards.

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