Warren Buffett: The 4 Assets That Made Me Billions In Every Crash!

You know, I've seen a lot of market crashes. More than I can even count, really. And after each one, people always ask me the same thing. They say, Warren, how did you make money when everyone else was losing their shirts? The answer isn't what they expect. You see, I didn't actually make money times during times the crashes, not exactly. I made money because I already owned the times, right times, things, times, going into times the crashes. Those things, those assets are what protected me. They allowed me to not just survive, but actually thrive. I'm 94 years old now, and I've lived through, what, 12 major crashes, 15, something like that. Think about the dot-com bust back in 2000, the financial crisis in 2008, the COVID crash in 2020. And you know what? Every single time, I had the same four types of assets, the same four things in my portfolio protecting me, even growing my wealth when everything else was falling apart. Today, I want to tell you what those four things are. Because if you're serious about investing for the long haul, if you want to build real, lasting wealth, you absolutely need these four things. Not just one or two, all four. They work together. They protect each other. They create a fortress around your wealth. And when the crashes inevitably come, and they always do, you'll be ready. Let's start with the first one, which is also the most important, cash. Now, I know what you're probably thinking. Cash? Warren Cash doesn't grow. Cash just sits there. Inflation eats away at it. And you're right. Cash is a terrible times, long-term times investment. But here's what people don't seem to understand. Cash isn't an investment at all. It's ammunition. See, during a crash, when everyone's panicking and selling off everything they own, when the market's down 30, 40, even 50 percent, that's when the real opportunities start to appear. That's when great businesses go on sale, when you can buy a dollar's worth of value for just 50 cents. But you can only take advantage of those incredible opportunities if you actually times have times cash on hand. If you're already fully invested, if every single dollar you own is already tied up in stocks, then when the crash hits, you can't do anything. You just have to sit and watch. You watch these amazing opportunities pass you by, and you're powerless to act on them. I always keep cash. Always. At Berkshire, we usually have somewhere between $20 billion and $150 billion in cash sitting around. People think that's crazy. They say, Warren, you're losing money to inflation. You should be investing that cash. But I'm not losing money. I'm being patient. I'm waiting for the right opportunities, for the next inevitable crash, for those moments when I can deploy that cash at unbelievably attractive prices. Think back to 2008, the financial crisis. Everything was falling apart. Banks were failing left and right. The stock market was in complete freefall, and I had cash, lots of it. So I made deals. I invested in Goldman Sachs, General Electric, and later, Bank of America. Not because I was brave, not because I was smarter than everyone else, but simply because I had cash, and they desperately needed it. And those investments, they made me billions, literally billions of dollars. But here's the critical point. I could only make those investments because I had consciously kept cash on hand, because I hadn't been fully invested when everything was going up. I'd been patient. I'd been waiting for the right moment. You see, cash gives you options. When you have cash, you can act decisively when others simply can't. You can be greedy when others are fearful. But if you don't have cash, if you're already fully invested, you're stuck. You can only watch, and watching great opportunities go by is the worst feeling you can have as an investor. Now, how much cash times should times you keep? Well, that depends on a lot of things. Your age, your personal risk tolerance, and how much money you need to cover your living expenses. But as a general rule, I'd say you should always have at least six months worth of living expenses readily available in cash. Think of that as your emergency fund, your safety net. And beyond that, you should have additional cash that you can invest, what I like to call dry powder. How much? Again, it depends on your individual circumstances. But I'd suggest somewhere between 10% and 30% of your total investable assets. When the market's expensive, when everything's going up and people are euphoric, keep more cash on the sidelines. When the market's cheap, when there's blood in the streets, keep less cash, because that's when you want to be deploying it strategically. The key is to always have times, sometimes cash available, and never be fully invested, because crashes always come sooner or later. And when they do, cash is king. All right, let's move on to the second asset, high-quality businesses. And I'm not talking about just any businesses or stocks that you simply times hope times will go up. I'm talking about real, enduring, high-quality businesses with a proven track record. See, during a market crash, most stocks go down. Everything goes down, really. But not all businesses are hurt equally. Some businesses, the truly great ones, actually get times stronger times during crashes. That's because their weaker competitors fail, allowing them to pick up market share and acquire assets on the cheap. Then, when the economy recovers, they're in an even better position than they were before. Let me give you a prime example. Coca-Cola. I bought it back in 1988, and I've held on to it through, what, five major market crashes now? And every single time, Coke comes through just fine. Why is that? Because people keep drinking soda. Even in a recession, even in a depression, they might drink a little less, but they still drink it. And Coke has an incredible brand, a global distribution system, and strong relationships with virtually every retailer and restaurant on the planet. You simply can't replicate that. It's a moat, a competitive advantage that just gets wider and deeper over time. So, when the market crashes, when the K.O. stock goes down 30% or 40%, I don't panic, because I understand the business, and I know that the underlying business is fundamentally sound. Eventually, the stock price will catch up to that reality. It always does. You see, that's what high-quality businesses do. They survive the crashes. They keep making money, and they keep serving their customers. And if you own them, if you simply hold on and don't panic, you'll be fine. Better than fine, actually, because when the market recovers, you'll be right back where you started, and then you'll continue to move upward. But if you own low-quality businesses, businesses that are heavily leveraged, or highly cyclical, or overly dependent on a strong economy, they might not survive a crash. They might even go bankrupt, and then your investment is worth absolutely zero. That's the key difference. That's why quality matters so much. Now, what exactly times makes times a business high-quality? Well, there are a few key things that I always look for. First, it needs to have a strong competitive advantage, a moat, something that protects it from the competition, whether that's a powerful brand, a strong network effect, economies of scale, or something else entirely. If a business doesn't have a moat, competitors can easily come in and eat its lunch, and eventually it'll struggle. Second, it needs to consistently generate cash, and I mean times lots times of cash. Not just accounting earnings, not just revenue, but times real times cash that actually comes into the business, because cash is what truly matters. Cash is what allows a business to survive tough times, pay dividends to shareholders, and invest in future growth. Third, it needs to have good management, people you can trust, people who are smart and honest, and who think like owners of the business, because even a great business can be destroyed if the management is bad. And fourth, it needs to sell something that people actually times need asterisk, not just something they times want asterisk, but something they truly times need asterisk, or at least something they strongly want in both good times and bad times, because if it's selling something discretionary, something that people can easily cut back on when times get tough, it'll inevitably struggle during a recession. So those are the characteristics of high quality businesses, and if you own a portfolio of them, if you own 5 or 10 or 15 great businesses, you'll do just fine through the inevitable crashes. Not because they won't go down in value, they will, but because they'll survive, and they'll come back stronger, and they'll continue to grow over the long term. That's the second critical asset, high quality businesses. Now, let's talk about the third asset, bonds. And I know bonds aren't exactly sexy, they're not exciting. They don't get talked about nearly as much as stocks, but they're still important, really important. See, bonds, especially high quality bonds like U.S. Treasuries do something that stocks simply can't do. They provide stability. They tend to go times up, times when stocks go down. During a market crash, when everyone's panicking and fleeing to safety, that safety almost always means government bonds. So, when stocks are falling sharply, bonds usually go up, or at least they don't fall nearly as much. This helps to cushion your overall portfolio and reduces its overall volatility. Now, I'm not a particularly big bond investor, personally. At Berkshire, we don't hold a large allocation to bonds because we have other ways to provide stability to our portfolio. But for most people, especially individual investors, bonds make a lot of sense, particularly as you get older, and especially as you get closer to retirement. Because when you're young, you can afford a higher level of volatility. You've got plenty of time to recover from market crashes. But when you're older, when you're actually living times off times your portfolio, you can't afford to lose 30% or 40% of its value in a short period of time. You need stability, and that's precisely what bonds provide. Now, it's important to remember that not all bonds are created equal. Some bonds are very safe, like U.S. Treasury bonds, the U.S. Government is virtually never going to default on those, at least not in dollars. But other bonds, like corporate bonds and especially junk bonds, are much riskier, really risky. During a market crash, those bonds can lose just as much value as stocks, because the underlying companies that issued them might actually go bankrupt. So if you're going to own bonds, stick with the high quality ones, U.S. Treasuries, and maybe some highly rated corporate bonds. But nothing too risky, because the whole point of owning bonds, the reason you own them in the first place, is for safety and stability. If they're not providing that, then what's the point? How much of your portfolio time should times you have in bonds? Again, it depends on your individual circumstances. But there's an old rule of thumb that says you should hold your age in bonds. So, if you're 30 years old, you should hold 30% of your portfolio in bonds and 70% in stocks. If you're 60 years old, you should hold 60% in bonds and 40% in stocks. Now, I don't think you need to be quite that rigid, but it's a pretty decent starting point. The key takeaway is that as you get older, you should gradually shift more of your portfolio into bonds and other stable investments, because you simply have less time to recover from any potential market crashes. And that brings me to the fourth and final asset, real assets. Now, what exactly do I mean by real assets? I'm talking about things that have intrinsic value, physical value, things that simply can't go to zero. Real estate, commodities, land, and infrastructure are all examples of real assets. They'll always be worth something, because they're times real asterisk. They exist in the physical world. Let me tell you about my personal favorite real asset, land. I own farmland, not a tremendous amount, but some. And I absolutely love it. Why? Because land is going to be there no matter what happens. The stock market can crash, the economy can go into a deep recession, banks can fail left and right, but the land is still there. It's still producing crops, and it's still generating income. And farmland is actually a pretty good investment times during times market crashes, because people always need to eat, no matter what's happening in the broader economy. So farms keep producing, keep generating cash, and keep paying rent if you've leased them out to farmers. It's stable income, and it's reliable income. Real estate can also be a good real asset, but you've got to be careful. Not all real estate is created equal. If you own residential real estate in a hot market, and that market suddenly crashes, you could lose a lot of money. We saw that happen back in 2008, when housing prices fell by 30%, 40%, or even 50% in some areas. But if you own real estate in good locations, in places where people actually times want times to live, and if you're not over leveraged, meaning you haven't borrowed too much money to finance the purchase, then real estate can provide both stability and a steady stream of income from rent. Another type of real asset that I like, and this might surprise some people, is productive assets. Real, tangible businesses, not just stocks on a screen, but actual operating businesses that produce goods and services. At Berkshire, we own a lot of these. Railroads, utilities, and various manufacturing companies. And these businesses are times real asterisk. They have physical assets, equipment, buildings, and infrastructure, things that inherently have value. Even if the stock market crashes, they keep operating, keep serving their customers, and keep generating cash. That's what I love about them. They're firmly grounded in reality. Now, most individual investors can't afford to buy entire businesses outright, but you times can times buy parts of them through stocks. And if you choose the right ones, companies with real assets and real cash flow, you're effectively getting exposure to real assets, not just flimsy pieces of paper. You're getting exposure to actual productive capacity. That's what protects you during market crashes. So, those are the four assets. Cash, high quality businesses, bonds, and real assets. Now, here's the really important part. You need times all times four, not just one or two. All four of them. Because they work together, they balance each other out. Cash gives you flexibility, the ability to act quickly when opportunities arise. High quality businesses give you growth, the ability to build wealth over the long term. Bonds give you stability, protection when stocks are falling. And real assets give you a foundation, something that simply can't go to zero. Together, these four assets create a balanced portfolio, one that can survive market crashes and actually thrive in the aftermath. Let me tell you how this played out for me back in 2008 during the financial crisis. Going into that crash, I had all four of these assets in place at Berkshire. We had cash, lots of it, probably around $40 billion or so. We had high quality businesses like Coke, American Express, Wells Fargo, and dozens of other operating businesses that we owned outright. We had some bonds, not a huge amount, but a decent allocation. And we had real assets, railroads, utilities, and various manufacturing plants. So, when the crash finally happened and the stock market fell by 50%, yes, our portfolio went down in value, but it didn't go down nearly as much as the overall market because we had that balance and diversification in place. And more importantly, we had cash available so we could act decisively. We could make strategic investments when everyone else was panicking. Goldman Sachs came to us. They desperately needed capital. So, I invested $5 billion at very attractive terms. General Electric also needed capital, so I invested another $3 billion. And those investments ended up generating enormous returns for us, billions and billions of dollars. But I could only make those investments because I had the foresight to keep cash on hand, because I had maintained that essential balance in our portfolio. You see, that's how you survive market crashes. Not by getting lucky, and certainly not by trying to time the market, but by having the right assets in place, by being prepared, by having cash available when opportunities arise, by owning businesses that are resilient and can survive the downturn, by having stability through bonds, and by having a solid foundation in real assets. That's the fortress. That's what protects you. Now, let's talk about how you can build this fortress for yourself. Because most people aren't managing hundreds of billions of dollars like I am. You might have $10,000, or $100,000, or maybe even a million dollars. It doesn't really matter. The underlying principles are exactly the same. Start with cash. Make absolutely sure you have an emergency fund in place, covering at least six months of living expenses. That's non-negotiable. It's your essential safety net. Beyond that, keep some additional cash available for investing, somewhere in the range of 10% to 30% of your portfolio. The exact amount will depend on current market conditions. When everything's expensive, keep more cash on the sidelines. Be patient. When things are cheap, keep less cash and deploy it strategically. Next, build a portfolio of high-quality businesses. Find five, or 10, or 15 companies that you genuinely understand. Companies with strong moats, with powerful brands, and with excellent management teams. Buy them at reasonable prices, and then just hold them for the long term. Don't trade excessively. Don't try to time the market. Just own good businesses, and let time do the heavy lifting. Then, add some bonds to your portfolio. If you're young, maybe just 10%, or 20%. If you're older, maybe 50%, or 60%. Use your age as a general guide, but adjust the allocation based on your personal situation and risk tolerance. And stick with high-quality bonds, mostly U, S, treasuries, and perhaps some highly rated corporate bonds. Avoid anything too risky, because the primary goal is stability. Finally, get some exposure to real assets. This is often the hardest part for most people, because you obviously can't just go out and buy a farm if you only have $10,000 to invest. But you, times can times, buy stocks of companies that own significant real assets. Utilities, railroads, and real estate investment trusts, REITs, for example. Or you can own real estate yourself, maybe a rental property, or even just your own home. The key is to have something that's grounded in physical reality, something that generates income, and something that will always have some inherent value. Now, let me tell you what happens when you actually do this. When you build a portfolio with these four essential assets, market crashes will still hurt. They always do. You'll see your portfolio go down in value, but it won't go down as much as the overall market, because you've got that essential balance and protection in place. And more importantly, you won't panic, because you'll know that you have cash available. You'll know that your businesses are high-quality and will likely recover. You'll know that your bonds are providing essential stability. And you'll know that you have a solid foundation in real assets. That knowledge, that confidence, is what allows you to act decisively when others are panicking. It's what allows you to be greedy when others are fearful, as I like to say. You see, the secret to making money during market crashes isn't about being smarter than everyone else. It's not about predicting when they'll happen. It's about being prepared, about having the right assets in place, and about having the right mindset. Market crashes are actually opportunities in disguise, but only if you're adequately prepared. Only if you've assembled these four essential assets. Now, let me tell you about another crash, the COVID crash in 2020. That one was really interesting, because it happened so incredibly fast. The market fell by 35% in about a month. It was the fastest crash I've ever seen. Just boom, straight down. And you know what I did? I did the exact same thing I always do. I had cash available, so I bought stocks. I invested in companies that I liked and that had suddenly become very cheap. I had high-quality businesses in my portfolio, so I didn't panic, because I knew they would ultimately survive. I had bonds for essential stability, and I had real assets that continued to operate smoothly throughout the downturn. And six months later, the market was right back to where it started. And a year later, it was higher than ever before. But a lot of people panicked during that crash. They sold their investments at the very bottom. Why? Because they weren't properly prepared. They didn't have the right assets in place. They were fully invested in stocks with no cash, no bonds, and no solid foundation. So when the crash happened, they had no choice but to sit and watch their portfolios plummet, or even worse, to sell their investments at a significant loss. And they lost real money. Permanent money. That's the tragedy of it all. That's what happens when you're not prepared for the inevitable. You know, I've been doing this for 75 years now, and I've learned something incredibly important. It's not about being the smartest investor in the world. It's not about making the most brilliant stock picks. It's about surviving. It's about staying in the game. Because if you can survive long enough, if you can make it through the inevitable market crashes, you'll do just fine. Better than fine, actually. You'll get rich. But you can only survive if you have the right assets in place. Cash, high-quality businesses, bonds, and real assets. Those four things are your armor. They're your protection. And if you've got them, you can survive anything, any crash, any crisis, and you'll come out on the other side even stronger. Now, let's talk a little bit about the psychology of market crashes. Because having the right assets in place is really only half the battle. The other half is having the right mindset. See, market crashes are terrifying. Really terrifying. When you see your portfolio suddenly down by 30% or 40%, when you see scary headlines about banks failing and companies going bankrupt, your natural instinct is to panic, to sell everything, and to get out before it gets any worse. That's just human nature. It's how we're wired. But it's also the absolute worst thing you can possibly do. Because that's when you lock in your losses. The way you combat that natural instinct, the way you stay calm and rational during a crisis, is by having unwavering confidence in your assets. If you have cash on hand, you know you can survive. You can even take advantage of the opportunities that arise. If you own high-quality businesses, you know they'll likely recover and continue to grow over the long term. If you have bonds in your portfolio, you know they're providing essential stability. And if you have a solid foundation in real assets, you know you have a floor, a backstop. That knowledge, that confidence, is what allows you to think clearly and make sound decisions, instead of purely emotional ones. You see, the biggest mistakes that investors make are almost always emotional mistakes. Panic selling, greed-fueled buying, blindly following the crowd. Those are all emotional reactions, driven by fear or greed, and not by logic or rational analysis. And the way you avoid those emotional mistakes is by being fully prepared, by having the right assets in place, and by having a well-defined plan. When the next inevitable market crash comes, you won't panic, because you'll know that you're prepared. You'll know that you have what you need to survive and ultimately thrive. And that confidence is truly priceless, really priceless. Now, let me share one more thought about opportunity. See, market crashes aren't just threats, they're also incredible opportunities. The very best opportunities in investing tend to arise times during times market crashes, when everyone else is panicking, when great companies are selling for just 50 cents on the dollar, when fear is rampant and rationality has completely left the building. That's when you can really make some serious money. That's when you can get rich. But you can only take advantage of those incredible opportunities if you're adequately prepared, if you have cash available, if you have the right mindset, and if you're not panicking right along with everyone else. I remember back in 2008, I wrote an op-ed for Times, the New York Times asterisk. It was in October, right in the middle of the financial crisis, and I titled it, Buy American, I Am. People thought I was completely crazy. The world seemed to be falling apart, and I was telling people to buy stocks. But I wasn't crazy. I was prepared. I had plenty of cash. I had unwavering confidence in my businesses. I knew that this was an opportunity to buy great companies at unbelievably attractive prices, and I was absolutely right. Over the next few years, those investments I made during the crisis generated billions of dollars in profits. But here's the key point. I could only make those investments because I had been properly prepared, because I had maintained my allocation to those four essential assets, and because I hadn't panicked when everyone else was. That's the power of being prepared. That's why these four assets matter so much. Now, let me start to wrap things up. I've been talking for quite a while now, and I sincerely hope that you've understood what I've really been saying. These four assets, cash, high-quality businesses, bonds, and real assets, aren't just nice to have. They're absolutely essential if you want to build real wealth, if you want to survive the inevitable market crashes. And I can promise you that those crashes are coming. I don't know exactly when they'll happen. It could be next year, or it could be 10 years from now. But they are definitely coming. They always do. And when they come, you absolutely need to be ready. You need to have these four assets in place, in balance, and working together harmoniously. Because here's what I've learned over 75 years of doing this. Getting rich isn't about being brilliant. It's not about picking the next Amazon or Tesla before anyone else does. It's about surviving, about staying in the game, and about not doing stupid things that will derail you. And the way you survive is by being adequately prepared, by having cash available when opportunities arise, by owning businesses that are resilient and can endure over time, by having stability through bonds, and by having a solid foundation in real assets. That's the fortress. That's the essential protection. And if you build it, if you consistently maintain it, you'll survive every crash that comes your way. And not just survive, you'll actually thrive. Because while everyone else is panicking and losing money, you'll be calm, you'll be prepared, and you'll be ready to act decisively. You see, I'm nearing the end of my life now. And when I look back, when I think about all the money I've made and all the wealth I've built, it didn't come from being the smartest person in the room. It didn't come from some secret strategy or some brilliant insight that no one else had. It came from being consistently prepared, from having those four essential assets in place, from surviving every market crash that came my way, and from having the courage to act decisively when others were simply too scared to act at all. That's the whole game. That's everything. So, here's my advice to you, stated as clearly as I possibly can. Build your fortress. Get those four assets in place. Always keep cash on hand, 10%, 20%, or even 30% of your portfolio. Never be fully invested. Own high-quality businesses, companies with strong moats, powerful brands, and outstanding management teams. Hold some bonds for stability, for protection when stocks fall, and get some exposure to real assets, land, real estate, infrastructure, things that will always have inherent value. Do that, and you'll be fully prepared. And when the next inevitable crash, when the moment arrives and everyone else is losing their heads, you'll be the picture of calm. You'll be prepared, and you'll amass a significant fortune, just as I've consistently done during every market downturn. You know, folks often ask me what I take the most pride in, and it isn't the monetary wealth, it's not even being among the wealthiest individuals on the planet. It's the simple fact that I've weathered 75 years, navigating through every crash, every crisis, every moment of sheer panic. I remained actively involved in the game. I didn't self-destruct. I didn't commit foolish errors, and that's fundamentally because I possessed these four key assets. They served as my shield. They instilled confidence within me. They empowered me to take action when others were paralyzed by fear. And they will provide you with the same advantages if you cultivate them, maintain them diligently, and exhibit the necessary patience and discipline. Well, I believe that pretty much sums up my advice. Four essential assets, cash, high-quality businesses, bonds, and tangible assets. They have generated billions for me during each and every market crash, and they will undoubtedly safeguard you as well, provided you allow them to. Therefore, construct your financial fortress. Be thoroughly prepared, and when those inevitable crashes occur, as they most certainly will, you'll be in a state of readiness. You'll not only survive, but flourish. And you'll eventually look back sometime in the future, years or even decades down the line, and you'll be extremely grateful that you heeded this advice. That's a promise I make to you. I truly do.