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Two tangible assets Warren Buffett prefers over Bitcoin
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Despite the recent decline, bitcoin has risen more than 120 percent over the past five years. But while the world’s largest cryptocurrency has clearly hit the mainstream, one prominent investor remains critical of the opportunity: Warren Buffett.
At Berkshire Hathaway’s annual shareholder meeting this year, Buffett said that while he doesn’t know whether bitcoin will go up or down going forward, he’s pretty sure “it’s not producing anything.”
And that is why the Oracle of Omaha does not own the asset.
“If you told me you own all the bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it?” he asks. “I have to sell it back to you somehow. It’s not going to do anything.”
To put that into perspective, bitcoin was trading at around $51,000 apiece when Buffett made these comments. Now the cryptocurrency has fallen to $21,000.
While criticizing bitcoin, Buffett touched on two assets that he would buy if given the opportunity.
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Agriculture and bitcoin don’t have much in common. Bitcoin was created in 2009 while agricultural societies began to form around 10,000 years ago.
Buffett is not known for being an agricultural investor, but he sees value in an asset class critical to the sector – farmland. His point is that if you buy farmland, you have a tangible asset that produces food.
“If you said, for a 1 percent stake in all the farmland in the United States, our group would pay $25 billion, I’d write you a check this afternoon,” Buffett says.
Of course, you don’t need $25 billion to invest in American farmland. ETFs – which specialize in owning farms – allow you to do so with as little money as you’re willing to spend.
Gladstone Land (LAND), for example, owns 169 farms totaling 115,000 acres. It pays monthly dividends of $0.0458 per share, giving the stock an annual dividend yield of 2.7 percent.
Then there’s Farmland Partners (FPI), a REIT with a farmland portfolio of 190,000 acres and an annual dividend yield of 1.8 percent.
In addition, online crowdfunding platforms allow you to buy real estate, including agricultural land.
With high inflation, the prices of agricultural commodities including corn and soybeans are rising to new heights.
Apartment buildings are another asset that Buffett would not mind owning at the right price.
“[If] If you offer me 1 percent of all the apartment buildings in the country, and you want another $25 billion, I’ll write you a check. It’s very simple, says the legendary investor.
Whether the economy is booming or in a recession, people need a place to live. And with property prices rising to unaffordable levels in many parts of the country, renting has become the only option for many people.
You can always buy an apartment building yourself, find tenants and collect the monthly rent checks. Of course, condo-focused REITs can do that for you.
Camden Property Trust (CPT) owns, manages, develops and acquires multi-family apartments. It has investments in 171 properties containing 58,433 apartment units across the United States and offers an annual dividend yield of 3.3 percent.
Essex Property Trust (ESS) invests in apartments primarily on the west coast. The REIT currently yields 4.1 percent, supported by its stake in 253 apartment communities – in California and Seattle – totaling approx. 62,000 units.
The bottom line
Buffett prefers farmland and apartment buildings to bitcoin for a very simple reason: They produce something.
“The apartments will produce rent, and the farms will produce food.”
Bitcoin has exciting long-term upside potential. But for risk-averse investors who want to avoid as much volatility as possible, sticking to productive assets is a wise idea.
Those who want to take control of their investments should definitely explore online trading platforms. The best websites offer resources and tools to help investors make informed decisions as they build and manage their investment portfolios.
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