Economic guru Warren Buffett advises long-term investors to buy stocks instead of bonds.
"If you had to choose between buying long-term bonds or equities, I would choose equities in a minute," he told CNBC's "Squawk Box" on Monday in a wide-ranging interview.
"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," he said.
"So far this year, we've been a net buyer" of stocks, he added.
In his annual letter to Berkshire Hathaway shareholders released on Saturday, Buffett blasted the belief that bonds were a lower-risk investment over the long term. He recommended investors stay in equities due to the negative impact from 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," he 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."
"It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals — to measure their investment 'risk' by their portfolio's ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk."
Meanwhile, Morgan Stanley says it’s time to get bullish on bonds -- even as Goldman Sachs Group Inc. and Buffett issue warnings.
The sell-off in Treasuries, that began in earnest in September and ramped up in January, is ending, according to Morgan Stanley strategists. Not so for Goldman Sachs Group Inc., which is running its models through a scenario in which yields on 10-year notes hit 4.5 percent -- though it expects that number to be closer to 3.25 percent by the end of this year. Bloomberg reported.
There’s a lot at stake following the six-month rout in the $14 trillion U.S. government bond market that helped trigger jitters in global equities after years of gains. While record levels of short positioning in Treasury futures may augur the next leg down as the risk premium for holding longer-dated notes climbs, it’s far from a given that tighter U.S. monetary policy will drive ever higher yields after an almost 1 percentage point jump in the 10-year yield.
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