The 84-year-old billionaire emphasised the “disparate performance between stocks and dollars” over the previous 50 years.
“It has been far safer to invest in a diversified collection of American businesses than to invest in securities – treasuries, for example – whose values have been tied to American currency,” Mr Buffett said.
The same is true for the half-century before that, which included the Great Depression and two world wars, he added.
“To one degree or another it is almost certain to be repeated during the next century,” Mr Buffett said.
Stock prices will always be more volatile than their cash-equivalent holdings, he said, but noted that over the long term, it is the currency-denominated instruments that carry the true risk.
“That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk,” Mr Buffett said.
“Though this pedagogic assumption makes for easy teaching, it is dead wrong: volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray,” he said.
Mr Buffett acknowledged that owning equities for a day (or a week, or a year) is far riskier than leaving funds in cash-equivalents.
But that is only relevant for certain investors, including investment banks or parties with “meaningful near-term needs”, he said.
“For the great majority of investors, however, who can – and should – invest with a multi-decade horizon, quotational declines are unimportant,” Mr Buffett said.
“Their focus should remain fixed on attaining significant gains in purchasing power over their investing lifetime.
“For them, a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities.”
Mr Buffett also took the opportunity to take aim at institutional investors, who are just as susceptible to the “investment sin” of failing to stick with equities as “the little guy”.
“Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades,” Mr Buffett said.
“A major reason has been fees: Many institutions pay substantial sums to consultants who, in turn, recommend high-fee managers. And that is a fool’s game.
“There are a few investment managers, of course, who are very good – though in the short run, it’s difficult to determine whether a great record is due to luck or talent,” Mr Buffett said.
“Most advisers, however, are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship.”
