Best Investments in Hyperinflation
Have you noticed the hotel you have your eyes on is more expensive than last year or that your grocery bill has gone up even though you're buying the same amount of food?
As I’m sure you’re aware, you're witnessing the results of the country's latest inflation surge.
While the rise in prices on goods and services over the last few months has been mostly attributed to the world opening back up again, we don't know exactly how long it will last.
For the everyday consumer, increased prices may mean limiting any splurge spending to avoid a big hit to your wallet. But for those who invest, you're likely more concerned about your money losing value in the market.
A frequently asked question is ‘How do I protect myself in a period of hyperinflation? Again, we're witnessing inflation reaching 40-year highs month after month, so hard assets are what you should be looking at.
“The big inflationary periods of history usually have a mix of both monetary inflation and supply-side bottlenecks. That’s why even when the supply-side bottlenecks are eventually resolved and the rate of change of inflation settles down, prices for most things are permanently higher; the amount of money in the system has become permanently higher.” -Lyn Alden Investing During Stagflation May 2022
Here are some smart places to invest your 💰 money right now:
Why farmland? Farmland values have historically tracked inflation very closely, with a 70% correlation with the Consumer Price Index (CPI) and a 79.84% correlation with the Producer Price Index (PPI). This is because when food prices increase, farmers get higher commodity prices, and land is more valuable.
Many people don’t know that farmland has actually performed better than gold when it comes to inflation. You don’t need to buy an entire farm to get exposure with some of the offerings today from the likes of AcreTrader and FarmTogether.
2. Real Estate
Another historically validated investment option. Real estate is often used as an inflation hedge, allowing property owners and landlords to raise the value of their tangible assets and rentals. Buying property directly or indirectly through real estate investment trusts are the two ways to invest in real estate (REITs). Through the latter, small and medium investors can participate in the commercial real estate market. You need to always consider the price paid as well - if you overpay you likely won’t see any benefits. Today, most real estate is priced to perfection around the country.
Commodities are one of the few asset classes that tend to benefit from rising inflation. As demand for goods and services increases, the price of those goods and services usually rises as well, as do the prices of the commodities used to produce those goods and services. Investing in commodities may provide a hedge against inflation because commodity prices often rise when inflation accelerates.
Due to its restricted quantity and decentralization, Bitcoin is an effective inflation hedge over years not weeks. These factors bring in scarcity and resilience power.
Let’s break it down for you. Inflation occurs when the government or the central bank continues to produce currency notes at an excessive rate, resulting in an excess supply of money. Pre-set limits on Bitcoin in circulation mean no excess supply, keeping inflation in check. And the decentralized nature of Bitcoin prevents it from falling into the hands of a centralized authority. Coercion occurs in any authority or institution by threats or bribes. Bitcoin, on the other hand, is resistant to these forces because there is no leader to bribe and no executive committee to persuade.
Historically, gold has been a favorite inflation-deterrent investment. The yellow metal has consistently increased in value during difficult times; the price of gold actually surged during Covid-19, making it an ideal investment item.
6. Managed Futures
Investing in managed futures programs that monitor the metals markets (such gold and silver) or foreign currency futures, for example, can provide a significant hedge against the effect that inflation can have on equities and bonds during periods of inflationary pressure. To put it another way, if stocks and bonds underperform due to increased inflation concerns, certain managed futures programs may outperform in similar market conditions. As a result, combining managed futures with these other asset classes may help you improve your capital allocation.
Inflation is not likely to go away and relying on traditional forms of savings and investments won’t be sustainable in the long term, especially with the ever-growing demands and needs.
Try to be mindful with your investments and if you're just getting started, don't be afraid to seek professional guidance.
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