American business magnate and value investing guru Warren Buffett turned 88 today, reminding us in an interview with CNBC that the more things change, the more things stay the same–especially with respect to his distaste for bonds. Backed by the S&P 500 in the midst of the longest bull market recorded, the “Oracle of Omaha” was quick to heap praise on U.S. equities over debt issues.
“If you had your choice between buying and holding a 30-year bond for 30 years or a basket of American stocks, there’s no question you’re going to do better holding stocks,” said Buffett. “It’s considerably more attractive than fixed-income securities.”
“That doesn’t mean they’re going to go up or down tomorrow, next week or next year, but over time, a bunch of businesses that are earning high returns on capital are going to beat a bond that’s fixed at roughly 3% for 30 years,” he added.
Related: 3 Bond ETFs Warren Buffett Would Actually Like
In a simple year-to-date chart comparison between the iShares Core US Aggregate Bond ETF (NYSEArca: AGG) and the S&P 500, the two represent a dichotomy between the two asset classes. The AGG is down 2.5% as opposed to the 7.7% increase in the S&P 500.
It’s been well-documented that the Berkshire Hathaway CEO is a strong proponent of investing in equities rather than bonds, telling CNBC in a previous interview that he’d “choose equities in a minute.”
“If you had to choose between buying long-term bonds or equities, I would choose equities in a minute,” Buffett told CNBC’s “Squawk Box” in an interview earlier this year. “If I were going to own a 30-year government bond or own equities for 30 years, I think equities will considerably outperform that 30-year bond.”
Buffett continued to lambaste bonds, telling Berkshire Hathaway shareholders in an annual letter that debt issues were not a lower-risk investment over the long term compared to stocks. Furthermore, he advised investors to keep their funds allocated in equities due to the negative impact caused by inflation on the purchasing power of fixed-income holdings.
“I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier — far riskier — than short-term U.S. bonds,” Buffett wrote. “As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.
Related: Global Fixed Income Views: Q3 2018
For more fixed-income ETF trends, visit the Fixed Income Channel.