Warren Buffett: Reaching for yield is stupid, but very human

Berkshire Hathaway's chairman and CEO Warren Buffett sat down with CNBC's Becky Quick to discuss the U.S. economy and his investment strategies.

Billionaire Warren Buffett told CNBC on Monday that investors should not reach for yield beyond their risk-tolerance, even with interest rates so low and stocks seemingly like the only place to get a return.

“If you need to get 3% and you can only get 1%, the answer is ... you should always adapt your consumption to your income,” the Berkshire Hathaway chairman and CEO said on “Squawk Box.”

“Reaching for yield is really stupid. But it is very human,” he said, delivering sobering advice to folks near or in retirement. “People say, ’Well, I saved all my life and I can only get 1%, what to do I do? You learn to live on 1%, unfortunately.”

“You don’t go and listen to some salesman come and tell you, ’I’ve got you some magic way to get you 5%,” he added.

Individual investors and institutional investors alike are chasing yield and that could have major “consequences over time” on financial markets, Buffett warned.

“It builds in slowing. People going crazy tech companies in the tech 1990s,” he said, referring to the boom and eventual bust of the dot-com bubble. “It can take a lot longer than you think. But eventually you get to midnight and everything turns to pumpkins and mice.”

Buffett spoke from Berkshire Hathaway headquarters in Omaha, Nebraska, two days after the release of his annual letter on how its businesses performed.

For more Warren Buffett, check out Squawk Pod:




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[mindsinmotion]

"Eventually you get to midnight and everything turns to pumpkins and mice."- Warren Buffett

[AlRoblesTV]

This two are getting along well they have special closeness w each otherBecky might get lucky in future and recieve fortune from this greatman.

[Je.rone_]

Adjusted your expenses based off your income not your income based off your expenses, he could've just as easily made it as a personal finance educator💪😂

[LamLawIndy]

What he's saying is that insurance companies need to increase premiums instead of relying on investment income. It would be interesting to find out if GEICO, General Re, and BoatUS -- which are all Berkshire Hathaway subsidiaries -- have hiked premiums.

[fcceznr]

He pretty much said in the only one that can bake real money you can’t do deal with it

[cogen]

That's fine for him to say, he's rich..Have the FED raise interest rates

[Fazzelgaming]

In the stock market you are your worst enemy