The Oracle of Omaha also had harsh words for traditional bonds.
In a Fortunearticle Buffett went so far as to say, "Right now bonds should come with a warning label."
"They are among the most dangerous of assets," Buffett wrote, "Over the past century these instruments have destroyed the purchasing power of investors in many countries."
To prove his point Buffett labeled inflation as the primary threat to bond investors, noting it takes no less than $7 today to buy what $1 did in 1965.
Instead of bonds, Buffett recommends "productive assets," including farmland and real estate.
But he saved his highest praise for stocks, especially the stocks of companies like The Coca-Cola Co. (NYSE: KO) and International Business Machines Corp. (NYSE: IBM), that consistently deliver inflation-beating returns.
But what if you're not comfortable betting most or all of your chips on stocks? And if traditional bonds are out, where else can investors turn for inflation beating returns?
TIPS Insure Wealth Against InflationEnter Treasury Inflation Protected Securities, or TIPS.
Unlike regular bonds, TIPS are designed to protect your principal against the ravages of inflation.
In fact, TIPS zig when other securities zag, providing diversification and safety to your portfolio.
TIPS are considered to be an extremely low-risk investment since they are backed by the U.S. government, and their par value rises with inflation while their interest rate remains fixed.
Here's how they work.