While many analysts have, over the past few years, reported that gold investment is the way to go, Warren Buffett, the chairman and CEO of a Berkshire Hathaway, has released a statement recently in “Fortune” that investing in gold, which many consider to be one of the safest and most consistent investments, is actually the riskiest one in the world. Because he is who he is, Buffett is able to break down the basics of investment theory and its history so that anyone can understand.

He explains in his article how what most investors consider as “safe investments” or “risky investments” are actually reversed. Once you consider the big picture and think about the amount of time involved in any investment, it becomes clear that stocks, which many investors think of as the riskiest of all investments, are actually the safest. Cash, then, which is thought to be safe, is actually risky.

Buffett explains that inflation will guarantee that cash will lose enormous amounts of value as time progresses. Over just the past century, the value of the dollar has dropped to below four cents while stocks have only appreciated. And while stock market crashes do happen, stocks are inherently wild, in that they are and always will fluctuate. This isn’t risky, Buffett claims. What is risky is the possibility that your investment will lose its purchasing power. This is what has happened to investments in cash over the past few years.

But stocks only increase their purchasing power.

Buffett believes that cash has a place in your investment portfolio because it is flexible and able to be easily liquidated. You will always need cash, because you don’t know what will happen in the future, and you don’t want to have to sell some of the investments you’ve had for a long time just to raise emergency cash when those same investments may be experiencing a fluctuation in price that could just be temporary. Therefore you should always have cash on hand, even if it is dangerous in the long run. Buffett describes how he always keeps at least twenty billion dollars of cash on hand because of its flexibility and because he knows that he’ll need it someday.

Buffett knows of what he speaks. As one of the wealthiest people in the world, 82 year old Buffett he has done his homework, and could tell you about gold facts until he was blue in the face. When he was a child, he evinced a strong interest in the stock market, actually visiting the Stock Exchange at the tender age of ten. When he was eleven, Buffett bought three shares on his own, as well as three additional shares for his sister. He continued to work hard, continually saving, until, by the time he finished college, he was worth more than ninety thousand dollars by contemporary standards.

According to Buffett, bonds should be issued with some kind of a warning label that would prevent investors from making the wrong choices.