Buffett explains why he’s keeping $180B in cash — and how investors can diversify beyond the stock market
Warren Buffett
Warren Buffett has one of the strongest long-term investing records in history. From 1964 to 2023, Berkshire Hathaway (BRK.B) delivered total returns of more than 4,384,748%, compared with roughly 31,200% for the S&P 500 over the same period (1) — a performance that earned Buffett the nickname “the Oracle of Omaha.”
Yet even Buffett doesn’t keep all of his money in the market. Berkshire Hathaway’s latest filings show that the company ended 2024’s first quarter with more than US$188 billion in cash and short-term Treasury bills — a figure that surprised even seasoned market watchers (2).
At Berkshire’s 2024 annual shareholders meeting, Buffett explained why:
“I don’t think anybody sitting at this table has any idea of how to use it effectively, and therefore we don’t use it,” he stated, emphasizing that “we only swing at pitches we like (3).”
Some analysts view the cash pile as a sign that Buffett is cautious about current valuations or broader economic conditions. Buffett himself warned that today’s interconnected world introduces more uncertainty than in the past:
“As the world gets more sophisticated, complicated and intertwined, more can go wrong,” he said, noting that Berkshire wants to be ready to “act when that happens (4).”
For investors who share that conservative outlook or simply don’t want all of their wealth tied to stock market performance, there are other ways to build diversification. Two popular paths are gold and real estate — assets that behave differently than equities and can help smooth long-term volatility inside a portfolio.
Gold is often described as a natural hedge against inflation because, unlike paper currency, it can’t be printed at will by central banks. That scarcity, along with its history as a store of value, gives the metal enduring appeal for investors.
This precious metal, therefore, is considered a safe-haven asset. It isn’t tied to any single country, currency or economy, and when financial markets turn volatile or geopolitical tensions flare, investors often seek safety in it, pushing prices higher. From 2023 to 2024, gold prices repeatedly hit new all-time highs, reflecting persistent demand from both institutional investors and central banks (5) (6) (7).
Gold can serve three specific roles in a diversified portfolio:
Inflation hedge: Gold has historically held purchasing power over long periods (8)
Currency diversification: Gold prices tend to move oppositely from the U.S. dollar (9)
Market shock stabilizer: Gold often rises when equities fall, reducing volatility (10)
Gold’s diversification effect is one reason it’s sometimes included in portfolios built for long-term stability rather than speculation.
Unlike Buffett — who historically avoided owning physical gold — everyday investors have several options to gain exposure.
Physical bullion. Bars and coins provide direct ownership. However, buyers must consider storage, security and insurance. Bullion is typically held outside registered accounts.
Gold-backed ETFs. These funds track the spot price of gold and are the most common access point for Canadian investors. ETFs can be held in Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs) or non-registered accounts, giving investors tax flexibility that physical bullion lacks.
Gold mining and royalty stocks. Canada is home to several major gold producers (11). While companies may not track gold perfectly, they offer leverage and growth potential and sometimes pay dividends (12).
Precious metals mutual funds. Some fund managers blend bullion exposure with mining equities for a balanced approach (13).
Gold can be useful in a diversified portfolio, but it has drawbacks, too. Unlike stocks, it doesn’t generate cash flow or earnings, and its price can stagnate for long stretches. Its primary benefit comes from balancing risk rather than producing income.
Real estate is a productive asset Buffett has praised over the years, mainly because it generates income. As he stated during Berkshire Hathaway’s 2022 shareholders meeting:
“If you offer me 1% of all the apartment houses in the country and you want another $25 billion, I’ll write you a cheque (14).”
Housing is a basic necessity. Whether the economy is thriving or slowing, people still need a place to live. This is why rental properties can continue to generate steady income through a variety of market conditions.
Real estate also has a reputation as a hedge against inflation. When materials, labour and construction costs rise, new properties are more expensive to build. That can push up the value of existing properties and, in many cases, rent as well.
The challenge, of course, is in accessibility. Buying a home or investment property can be expensive, especially in some Canadian markets such as Toronto and Vancouver — which rank among the most unaffordable in the world (15). High mortgage rates and elevated property price tags make ownership difficult for many households, and many renters are stretching to keep up with rising costs.
The good news is, you don’t need to purchase a rental property or take on a large mortgage to gain real estate exposure. Some common approaches include:
Real Estate Investment Trusts (REITs). REITs are publicly traded companies that own and operate income-producing real estate such as apartments, industrial warehouses, data complexes or shopping centres. They pay distributions from rental income and can be bought through regular brokerage accounts, including RRSPs and TFSAs.
Real estate ETFs. These ETFs combine multiple REITs into a single fund, giving investors broader diversification across sectors — for example, residential, industrial and offices — or geographies, such as Canada, the U.S. or globally (16).
Private real estate funds. Some firms offer access to private residential or commercial property pools. These are typically less liquid and may require minimum investment amounts, making them more suitable for experienced investors (17).
Purchase a principal residence. Owning a home is also a form of real estate exposure, although it’s less liquid, requires high capital and doesn’t generate income. For many, their home represents a large share of their net worth, which can create concentration risk if housing prices stagnate or decline. Buffett has viewed owning real estate as a personal asset — the value of which grows over time — rather than an investment due to high cost and management hassles.
Real estate can help diversify a portfolio and provide income, but it isn’t without drawbacks. Property values can fall, financing costs can rise and rental markets can soften. Even REITs, which trade on the stock market, can decline when interest rates rise or when investors shift toward other income-producing assets.
Buffett’s enormous cash position doesn’t predict a crash: it reflects patience and uncertainty. He’d rather wait for opportunities he understands than chase returns for the sake of staying fully invested.
That mindset can be useful for everyday investors who are worried about volatility or high valuations. Diversification isn’t only about owning more stocks — it’s about owning assets that behave differently when markets change.
Gold and real estate are two examples of assets that don’t always move in the same direction as equities. Gold has historically acted as a hedge during periods of stress, while real estate can offer income and inflation protection.
Neither is risk-free, and both have their limitations. But each can play a role in a broader portfolio, depending on an investor’s goals, time horizon and risk tolerance.
You don’t need to invest like Warren Buffett to learn from how he thinks. One of the most valuable lessons he offers is that you don’t have to swing at every pitch — and you don’t have to have all your money in one place.
If you’re concerned about uncertainty, rising rates or market swings, exploring assets outside of traditional stocks can add stability and balance over time.
And if you’re unsure where to start, take time to learn how different assets work and how they fit together. Good investing decisions come from understanding rather than urgency.
Berkshire Hathaway (1); CNBC (2, 3, 14); Wolf Street (4); The Royal Mint (5); VT Markets (6); CNN (7); Masterworks (8); AU Billion (9); Goldsilver (10); Mining Technology (11); The Global and Mail (12); RBC (13); The Newswire (15); Million Dollar Journey (16); Scotia Bank (17)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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