Warren Buffett recommends these investments in times of inflation!

The Consumer Price Index, which measures how much consumers pay for a variety of products, jumped 5.4% last month in the United States from its July 2020 levels, the biggest jump since 2008 .

Although some economists and other financial experts say that the current rate of inflation is not to be feared, it has become impossible to avoid inflation. But when it comes to investing, Warren Buffett, CEO of Berkshire Hathaway, says some companies are more likely to be successful than others.

At Berkshire Hathaway’s annual shareholders meeting in 2015, Buffett was asked which holdings in his company are most likely to thrive during a time of high inflation. Buffett replied, “The best business you can have is one that doesn’t require constant reinvestment because it gets more expensive as the dollar goes down.”

“The best business during a time of inflation is one that you buy once and you don’t have to keep investing capital later,” said Buffett, adding that “any business with a large capital investment tends to to be a bad company during times of inflation and often times it’s usually a bad job. “

He explained that businesses such as utilities or railways “keep eating more and more money” and are unprofitable. Where it’s better to own businesses that people partner with.

Instead, Buffett said, “A brand is a good thing to have during inflation.” For him, that includes brands like See’s Candy, which he has owned since 1972.

Buffett explained that owning real estate is particularly beneficial in times of inflation, as the purchase is a “one-time expense” for the investor and has the added benefit of being able to resell.

“If you have something that’s useful to someone else, its price tends to be priced in terms of replacement value over time, so you really get the inflationary boost,” Buffett said.

Buffett has long recommended that investors put their money in index funds, which hold every share in the index, making them automatically diversified. The S&P 500, for example, includes big names like Apple, Coca-Cola, and Google.