It's the ultimate call option for the Oracle of Omaha

Warren Buffett, chairman of Berkshire Hathaway (NYSE:BRK.A. BRK.B ), is one of the most iconic and closely watched investors on the planet. So when this dude talks about anything gold, value stocks or the idea of a lucky sperm club people listen.

And right now, investors should be listening to Warren Buffetts advice on the power of cash.

This article from Canadas Globe and Mail sums it up excellently:

Mr. Buffett, the world’s most successful (and richest) value investor, is sitting on almost $41-billion (U.S.) of cash at his Berkshire Hathaway holding company, the most in a year. Partly, that heap of greenbacks is a safety blanket. But it’s something more

He thinks of cash differently than conventional investors, (his biographer Alice Schroeder) says. This is one of the most important things I learned from him: the optionality of cash. He thinks of cash as a call option with no expiration date, an option on every asset class, with no strike price.

It is a pretty fundamental insight. Because once an investor looks at cash as an option in essence, the price of being able to scoop up a bargain when it becomes available it is less tempting to be bothered by the fact that in the short term, it earns almost nothing.

Got that?

In short, having cash around doesnt mean youre settling for a zero return on your investment. If you view things like Buffett, you are investing in the ability to make a move not in the static asset that is cash.

Maybe this will help you justify your behavior to peers when you decide to exit a big position but do nothing with the proceeds.

After all, study after study shows the biggest pitfall for investors is trading too much. Biding your time with cash and executing that call option at the right time isnt something that should be scoffed at. Consider the timely buy of Bank of America (NYSE:BAC ) preferred stock in 2011 that has resulted in mammoth returns so far as a case study.

If its good enough for Buffett, its good enough for most of us.

Further reading:

Jeff Reeves  is the editor of InvestorPlace.com and the author of  “The Frugal Investor’s Guide to Finding Great Stocks.”  Write him at  editor@investorplace.com  or follow him on Twitter via  @JeffReevesIP . As of this writing, he did not own a position in any of the stocks named here.