Buffett’s view of cash is different from that of ordinary investors. He believes that cash is a call option that never expires and can buy any asset and is not restricted by the strike price.

If having a lot of zero-yielding cash in your portfolio drives you crazy, then you might want to take a look at what Buffett thinks.

Currently, Warren Buffett’s Berkshire Hathaway is holding a huge amount of US$41 billion in cash, the most in a year. This may be because the U.S. dollar is a safe asset, but that is not the whole story. Alice Schroeder said that, like all things about Buffett, this strategy is more complicated than it seems.

Alice Schroeder is definitely qualified to say this. She spent more than 2,000 hours with Buffett and wrote his biography "Snowball: Buffett and His Wealthful Life". She knows Buffett better than anyone except his family.

Schroeder said that for Buffett, cash is not an asset with a near-zero return, but a call option that can be priced. When he thinks the return on assets is low, he would rather put his money in a bank with extremely low interest rates than use it to buy assets.

She said: "Buffett's view of cash is different from ordinary investors. Cash is selective, which is one of the most important things I learned from him. He believes that cash is a permanent A call option that does not expire can purchase any asset and is not subject to a strike price. ”

This is a very basic insight. Because once investors treat cash as an option, they have the opportunity to make a big bargain. Instead of being attracted by short-term benefits, you will gain nothing in the end.

An investor's portfolio is not a simple binary of either holding cash or buying bonds and stocks. The key is what proportion of cash is held to be enough to purchase assets when the opportunity arises, while also considering the opportunity cost of holding cash upfront?

"There is a view that Buffett just likes cash and likes to watch cash pile up, but in fact, this selectivity is based on complex mathematical calculations. Even though many times Buffett is just in his head Do the math."

Achroeder said that many of Buffett's calculations were done on the couch in his Omaha office, where he just sat and read and thought. Achroeder spent several hours studying Buffett's drafts. She discovered that although Buffett usually likes to say some short famous aphorisms, in fact, the investments he makes are very complicated.

For those investors who, like Buffett, regard cash as a call option and are struggling to find undervalued assets, the "call fee" they pay will be the opportunity cost, that is, the income from investing in other assets and holding it. There is a gap between getting cash and getting almost zero returns.

Schroeder said: "Generally speaking, he likes to simplify concepts, for example, he said, 'I like to hold a lot of cash because I can use it at any time.'"

Schroeder said , she hopes more investors can learn from this. For many investors, holding cash is something of a cop-out. When they see their fund managers holding large amounts of cash, they feel that their money is not getting the value it deserves, which is not true.

“If investors realize that their fund manager is an expert in treating cash as a call option, moving in and out of the market at will, they may feel that their investment is better value for money. ”