The One-Third Rule: A 3,000-Year-Old Wealth Strategy the Super Wealthy Still Use
What do the super wealthy actually do with their money? One of the most eye-opening answers is a strategy believed to be around 3,000 years old: the one-third rule.
It’s attributed to King Solomon (known as the Prophet Solomon in the Islamic tradition), regarded as having built one of the largest amounts of wealth in history. This article explains how the rule works, why holding cash goes against what most financial experts say — and why one of the most famous investors of the last 100 years, Warren Buffett, appears to follow it almost exactly.
What Is the One-Third Rule?
The principle is simple: when you invest, you divide your wealth into three equal parts:
| One-Third | What It Covers |
|---|---|
| Business | Running or owning businesses that sell goods and services |
| Investments | Real estate, gold, and anything else you invest in for a return |
| Cash | Cash and cash reserves |
The business and investment portions don’t require full ownership — it’s the return and exposure that count. Many investors, including the presenter, don’t follow this rule, and it’s the third part — cash — that tends to surprise people most.
Why Hold So Much Cash When Inflation Eats It?
Most top financial experts say the opposite: don’t hold more cash than an emergency fund of around three to six months, because inflation erodes the value of cash. Technically, that’s true — inflation does attack cash. So why do the super wealthy hold a full third of their wealth in it?
The answer is that each part of the three-way split protects the others:
- Businesses are vulnerable in a recession. A downturn can hit trading, reduce profitability, and put pressure on cash flow. If everything is in one basket, everything falls together.
- Investments protect against inflation. When inflation rises, assets such as real estate and gold bullion tend to rise in value, offsetting the damage inflation does to cash.
- Cash protects your businesses and cash flow. If your business is struggling, cash reserves let you keep going without having to sell assets or go to the bank.
Cash as a Wealth Enabler: Buying When Others Have to Sell
The biggest reason of all is opportunity. When a recession hits and other people are forced to sell, whoever holds cash can buy businesses, real estate, and gold at lower prices. For example, a business that might normally be valued at £10 million could potentially be bought for £5–7 million from an owner who didn’t have reserves or didn’t manage their position. Those holding cash are positioned to buy at lower rates and grow their wealth even faster — which is why cash is described here as a wealth enabler, not just a defensive asset.
Where Do the Wealthy Keep Their Cash?
Importantly, the super wealthy don’t simply leave this third sitting in a current account. Much of it is held in bonds and similar assets that are highly liquid, earning roughly 3–4% at current levels. That offsets some of the inflation drag while keeping the money instantly accessible — so when an opportunity arises, or when times get tough, there’s no need to go to the bank or sell assets in order to survive.
Does the Rule Still Work in 2026? The Warren Buffett Case Study
To test whether this ancient strategy still holds up, the presenter looks at Warren Buffett — widely regarded as the most famous investor of the last 100 years — and the makeup of his main company, Berkshire Hathaway, based on its latest results. All figures below are in US dollars.
| Category | Approximate Amount | Share of Total (approx.) |
|---|---|---|
| Cash and cash equivalents | $397.4 billion | ~33% |
| — of which, cash | $58.1 billion | |
| — of which, Treasuries (highly liquid bonds) | ~$339.3 billion | |
| Investments in companies | ~$727 billion | ~60% |
| Other items | ~7% |
Against total assets of roughly $1.2 trillion, Berkshire’s cash and equivalents of $397.4 billion work out at almost exactly 33% — spot on the one-third rule. The investment portion includes partial stakes in well-known companies such as Apple and Coca-Cola, alongside companies Berkshire owns outright. The Treasuries earn an estimated 3–4% in interest, which Buffett is willing to accept in exchange for liquidity.
Why Is Buffett Sitting on Almost $400 Billion?
Buffett isn’t holding a three-to-six-month emergency fund — he’s holding close to $400 billion. The presenter’s reading is that opportunities come to people who have cash, and that Buffett is positioning for what the presenter believes is a major recession coming, with the potential to “go shopping” for major companies at lower prices. The presenter also notes that Buffett is understood to own roughly 37% of Berkshire Hathaway itself.
Key Takeaways
- The one-third rule splits wealth across business, investments, and cash.
- Each third protects the others: investments hedge against inflation, cash hedges against recession.
- Cash isn’t just defensive — it lets you buy businesses, property, and gold at lower prices when others are forced to sell.
- The wealthy hold much of their cash in liquid, interest-bearing assets such as bonds, not idle in a bank account.
- Warren Buffett’s latest figures show cash and equivalents at almost exactly 33% of Berkshire Hathaway’s total assets.
Build a Balanced Wealth Strategy with GoldHouse Accounting
Balancing business, investments, and cash reserves is one of the most important decisions an entrepreneur can make — and getting the structure right makes all the difference. At GoldHouse Accounting, our tax advisors and wealth management consultants help business owners and property investors build tax-efficient strategies across business, property, gold, and pensions, so they’re positioned to protect their wealth in tough times and act when opportunities arise. Get in touch to find out how this could work for you.
This article reflects the presenter’s personal views and analysis. Figures quoted for Berkshire Hathaway are approximate, in US dollars, and based on figures as stated at the time of recording. Views on a future recession are the presenter’s opinion, not a prediction or guarantee. This is not personalised financial, tax, or investment advice — speak to a qualified adviser before making investment decisions.
