Over the past several months, high-growth companies' stocks have taken a pounding. While many of them are solid businesses and their share prices may certainly rebound, 2022's market volatility has shown the importance of holding top-quality investments that can weather any storm and deliver great long-term returns.
With that in mind, here are three investments that I'm confident will be excellent long-term wealth creators -- holdings that will allow you to sleep at night no matter what's happening with inflation, interest rates, or the economy in the short term.
If I could only own one stock...
I've said before that if I could only own one stock in my portfolio, I would pick Berkshire Hathaway (BRK.A -0.57%) (BRK.B -0.42%) without question. For one thing, it's like a diversified portfolio all in one stock. The conglomerate owns more than 60 subsidiary businesses and a stock portfolio worth well over $300 billion. Most of those investments were selected by Warren Buffett himself, and most are well-positioned to do well in good times and bad. In fact, the broad-based S&P 500 index has had negative total returns in 11 years since Buffett took the reins at Berkshire Hathaway, and his company outperformed the market in all but two of them.
Perhaps my favorite thing about Berkshire Hathaway in an uncertain market environment is its financial flexibility. Even after spending over $50 billion buying various stocks during the first quarter, Berkshire Hathaway has $106 billion in cash on its balance sheet, plus the billions its businesses generate each quarter. This allows the company to pursue opportunistic acquisitions or investment opportunities, or buybacks of its own shares if it sees them as timely.
You don't need to do extraordinary things to get extraordinary results
Buffett became one of the most successful investors of all time largely by picking stocks and individual businesses to buy. Given that, it might surprise you to hear that he has said on several occasions that the best investment most people could choose would be a low-fee S&P 500 index fund. The Vanguard S&P 500 ETF (VOO 0.71%) is a good example.
Essentially, with this ETF, you're investing in the entire S&P 500 index -- 500 of the largest public U.S. companies. Its performance should match that of the index, and any dividends paid out by the underlying stocks are passed through to investors. (The current yield is about 1.6%.)
This might not be the most exciting investment, but don't underestimate its potential. A $5,000 investment in an S&P 500 index fund would grow into about $87,000 in 30 years at the index's historic rate of return. As Buffett has said: "It is not necessary to do extraordinary things to get extraordinary results."
This is as unstoppable as growth stocks get
Amazon (AMZN -0.50%) has been the worst-performing large-cap tech stock in 2022's downturn. Its shares are off by 42% from their 52-week high. And to be fair, there are some good reasons for that. Amazon's sales growth in the first quarter was the slowest it has been since the early days of the company, and with the possibility of a recession looming, it's reasonable to expect things to slow down even more in the quarters ahead.
However, not even a deep recession could stop the e-commerce trend in the U.S., of which Amazon has clearly been the biggest beneficiary. In fact, Amazon has more of the domestic e-commerce retail market than the next 10 largest players combined. With less than 15% of total retail sales taking place through e-commerce, Amazon still has opportunities for major long-term growth. And don't forget about Amazon Web Services (AWS), the dominant player in its part of the cloud business, or some of the promising new lines the tech giant is getting into. This company is an absolute powerhouse, and a short-term retail slowdown isn't going to derail it.
Expect volatility, but sleep soundly with these
To be perfectly clear, all three of these investments could remain volatile while high inflation, rising interest rates, and recession risk dominate the conversation on Wall Street. But investors can sleep soundly knowing that these are three excellent places to put capital to work over the long term.
