Inflation

[Ktrain]

James,

Since the Fed keep printing ton of money for wasteful spending, and China and Russia working on to kick US dollar out of the trade for Oil. I can see the inflation soon will happen ? How can we invest our money when the inflation going up ? What is best asset class to invest what if US dollar is no longer a world reverse currency , or another way US dollar is collapse?. Thank you.

[James]

Inflation is a very real concern with the United States current economic policies. As with any policy though there is always a way to protect yourself and even profit from these things. 

Instead of holding cash assets are going to be a much better bet. Things that we currently measure against the USD. Assets that have limited availability will fare best in the world of inflation. Here are a few options where I place my cash to help hedge against inflation risk:

Real estate is a great place to park your cash. As long as your leases are shorter term you will be able to pace your rent payments with inflation on a year to year basis if you are leasing in one year intervals. 

Gold / Silver is of limited quantity and has been a great store of value for years. 

Bitcoin although is an extremely volatile and should be approached with skepticism is also a limited asset as long as the creators obey their own rules they set out for themselves. I also think Bitcoin can help hedge against currency risk in the case that the USD is no longer the world reserve currency. 

A business since you will be able to adjust prices of goods or services rapidly should allow you to keep pace with inflation. Your cash is then stored in inventory you just need to make sure you do not have to much inventory on hand where the value of that inventory drops as the value of the USD drops. 

Invest in other countries or other currency baskets to help hedge risk. If the USD is no longer the world currency what do you think replaces it? That may be a good place to move some capital. 

Other then that you have stock market but companies are always adding shares to the share count but I would think a stock in a great company is still going to preform better then the USD in a hyper inflation scenario.  

Real Estate is my personal favorite. Easy business model and if you stick with properties when you are starting out that will always be in high demand they should be pretty liquid in the event you may need to sell a property. We can all see though land is a finite asset so real estate makes the most sense for protection. 

Hope this can provide some ideas on how to protect against inflation risk. How are others dealing with the risk of inflation? 

 

[Ella]

How good is silver/gold when it comes to keeping money safe? I always hear of people investing in it but I don't know how to go about doing it. I mean it sounds like a good idea if inflation is coming. The cost of both will go up which means you will have more profit. 

[James]

32 minutes ago, Ella said:

How good is silver/gold when it comes to keeping money safe? I always hear of people investing in it but I don't know how to go about doing it. I mean it sounds like a good idea if inflation is coming. The cost of both will go up which means you will have more profit. 

Well gold and silver are alright hedges against inflation as they are traded against a currency basket. So in theory as money becomes worth less gold and silver should be worth more relative to the value of the cash. There is a limited supply of these resources so in theory that should lead to positive price action over the long term since demand will be larger then supply. 

I prefer real estate as an inflation hedge especially since you can have your holding generate cash for you while keeping you safe against the devaluing dollar. 

In the end diversification (never have all your eggs in one basket) is the name of the game and the way to feel the most secure. 

[Ella]

On 6/1/2021 at 11:35 AM, James said:

Well gold and silver are alright hedges against inflation as they are traded against a currency basket. So in theory as money becomes worth less gold and silver should be worth more relative to the value of the cash. There is a limited supply of these resources so in theory that should lead to positive price action over the long term since demand will be larger then supply. 

I prefer real estate as an inflation hedge especially since you can have your holding generate cash for you while keeping you safe against the devaluing dollar. 

In the end diversification (never have all your eggs in one basket) is the name of the game and the way to feel the most secure. 

When you say real estate, do you mean actual houses or just land/property... Or both? I have seen a lot of open land being bought up left and right in the last few months around here but nothing is being built on them. Do people invest in land without housing? 

[James]

1 hour ago, Ella said:

When you say real estate, do you mean actual houses or just land/property... Or both? I have seen a lot of open land being bought up left and right in the last few months around here but nothing is being built on them. Do people invest in land without housing? 

Either or. I like buying houses because I can make them produce cash more easily then raw land. I have done a couple land transactions though and both went as planned. Both buys were buy and hold until they are ready to develop that area. Understanding how the city is planning and what is going to be built where is critical. Generating cash while holding your land may be a little more challenging depending on the kind of land. There is only so much land available though and its not like we can go out and just build more. It is a finite asset which the laws of supply and demand state that over time it should increase in value.