No matter what you believe about cryptocurrencies, it's hard to argue that Dogecoin (DOGE 1.30%) should be viewed as a real investment. The cryptocurrency was created as a joke back in 2013, and there's no upper limit on the supply of coins. The arguments for Bitcoin (BTC 2.64%) related to scarcity simply don't apply to Dogecoin, and there are countless alternative cryptocurrencies to choose from.
The price of Dogecoin has inexplicably soared nearly 7,000% this year. This huge rally has no doubt lured in plenty of people looking to strike it rich. As in any bubble, you can make a lot of money if you get the timing right. If you get the timing wrong, as most people do, your losses can be brutal.
Get-rich-quick schemes are nothing new. It's human nature to fall for them. Everyone wants to make money fast. Dogecoin, and perhaps most cryptocurrencies in my opinion, are just the latest iteration of this age-old phenomenon. You probably won't get rich gambling on Dogecoin. Sorry, but it's true.
Buy this rock-solid stock instead
There are few ways to get rich fast without taking on a massive amount of risk. However, it's not all that hard to get rich slowly. Buying shares of high-quality companies and holding them for a long time is the best way to build wealth over many years and decades.
One of the best stocks to buy and hold is Berkshire Hathaway (BRK.B 0.09%). The conglomerate, headed by legendary investor and cryptocurrency skeptic Warren Buffett, is not going to double your money tomorrow. But what it can do is grow your wealth over time.
Berkshire is essentially a collection of world-class businesses plus a massive investment portfolio. Berkshire's subsidiaries include GEICO, BNSF Railway, Duracell, Fruit of the Loom, Dairy Queen, Berkshire Hathaway Energy, and many more companies. Berkshire's subsidiaries produced a whopping $21.9 billion of operating earnings in 2020 despite the pandemic.
Berkshire's insurance operations give the company a pool of money, called insurance float, that represents the difference between premiums collected and claims paid out. This money, which now totals $138 billion, can be invested and earn Berkshire profit. Insurance is a volatile business prone to very large losses on occasion, but this float has helped fuel Berkshire's success over the years.
Berkshire's investment portfolio was worth $281 billion at the end of 2020. Apple is by far the largest holding; Berkshire owned a 5.4% stake in the tech giant worth about $120 billion. Other major holdings include Coca-Cola, Bank of America, American Express, and Verizon. Berkshire also owns a large stake in food giant Kraft Heinz.
If there's any company that will still be around in 50 years and probably be worth far more than it is today, it's Berkshire Hathaway. Buffett built Berkshire with careful and disciplined deal making, being careful to avoid overpaying for investments. This means that Berkshire has inevitably underperformed during some periods when prices were high and when good deals were scarce. But over its entire history, Berkshire has nearly doubled the return of the S&P 500 index with dividends included.
Berkshire may not be able to repeat those returns in the coming decades, given that the company is already worth more than $600 billion. There are no sure things. But if you could only hold one investment for the rest of your life, shares of Berkshire Hathaway would be an obvious choice.
It can be tempting to speculate on risky assets. Gambling with a small amount of money, an amount that you're willing and able to lose, can be fun. But treating something like Dogecoin as an investment is just not a good idea. Gamble if you want, but don't expect to get rich doing it, and don't be surprised if you lose most of your money.