Cash is necessary ‘like oxygen’—but it’s ‘not a good asset’
When Warren Buffett stepped down as CEO of Berkshire Hathaway at the end of 2025, the company had a massive cash stash on hand. Berkshire said it had more than $370 billion in cash equivalents on the books at year’s end, largely held as Treasury bills.
Buffett, 95, told CNBC’s Becky Quick on “Warren Buffett: A Life and Legacy” that it’s not just a matter of being more conservative with his investments in his old age. Instead, he explained, moving the needle on a portfolio the size of Berkshire would require an enormous investment. And he couldn’t find an investment worth spending his huge pile of cash on.
“It’s about external conditions,” he told Quick. “Believe me, if after we finished talking you said, ‘I have a great $100 billion idea.’ I would say, ‘Let’s talk.'”
As a result, Buffett said he would rather spend his money making more money. While the cash on the company’s books earns a fair amount of interest, Buffett prefers productive investments, such as stocks, that can grow at a compound rate over time above and beyond the rate of inflation.
“It is necessary at certain levels, but cash is not a good asset,” he said. “It’s like oxygen for your portfolio, and while it’s not cheap and exciting to get, it’s necessary,” he added. Essentially, Buffett likes to keep some cash to pay off liabilities and as “dry powder” for attractive acquisitions.
“You need oxygen, and if you go without oxygen for four or five minutes, you’ll learn,” Buffett said. “So is cash. So you need to have it with you at all times because you never know what’s going to happen.”
How to hold cash using the Buffett method?
While managing Berkshire’s massive portfolio, Buffett’s cash dilemma was unrelatable to ordinary investors; Most of us don’t have more money than we can reasonably give away. But here’s still the Oracle of Omaha’s approach to cash management: Many financial professionals give advice to their clients.
Notably, Buffett does not flee to the safety of cash or bonds when he believes the market is overvalued or a crash is imminent. He has repeatedly said he would prefer to invest, even though his cash position has grown as he and Berkshire await attractive opportunities.
“Berkshire shareholders can be confident that we will forever allocate a significant majority of their money into stocks (mostly American stocks), but most of them will have operations of international significance,” Buffett wrote in his statement. 2024 shareholder letter. “Berkshire will never favor ownership of cash equivalents over ownership of good businesses that are controlled or only partially owned.”
Buffett said in his letter that periods of hyperinflation in the past have eroded the value of cash and left bonds in the dust. By contrast, investable businesses “will generally find a way to deal with monetary instability as long as their products or services are desired by the country’s citizens,” Buffett wrote.
In fact, from January 1975 to January 2026, the S&P 500 index rose nearly 6,700%, compared to a 524% increase in the Consumer Price Index. According to data analyzed by Charles Schwab.
In general, Buffett encouraged investors to invest regularly in a broad diversified manner over the long term. “Consistently buy the S&P 500 low-cost index fund,” Buffett told CNBC in 2017. “I think that’s always been the thing that makes the most sense in practice.”
But some cash is still vital because no one (not even Buffett) knows what will happen in the short term. “I may have read every book in the public library, but I haven’t found the answer to the question of what the stock market is going to do next week, next month, or next year,” Buffett told Quick.
Financial advisors often advise day traders to establish and maintain emergency cash reserves equal to three to six months of expenses. That way, if an emergency arises like a job loss or a surprise medical bill, you can keep the rest of your financial life safely on track.
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