One of the best words of advice I’ve received from my dear Grammy is to always make your money work for you. Many people use the stock market as a path to build wealth for the future, though not as many as you might think. Can you believe that in 2017 just 54% of American households own stocks according to Gallup.
Considering all your options and their long-term implications is a must when making any type of financial decision. Investing is arguably one of the best ways to successfully increase your wealth over time, at least when done the right way. Investing in real assets can be an excellent option for protecting capital during volatile market conditions. It’s a topic we don’t get into much and I thought it would be good to have a nice adulting post so we can have some extra cash for all our adventures. Enjoy!
What are ‘Real’ Assets?
Real assets are tangible or physical assets which have value, such as real estate. The Los Angeles and Miami real estate markets, as well as many other coastal cities, are experiencing a boom, but this category includes many other sectors like gold, commodities, rare coins and jewelry, art, agriculture, infrastructure, private energy, timberland and more.
Financial assets, such as stocks and bonds, are valued based on a contractual claim of an underlying asset. For example, if you buy Roku stock, you’ll have contractual ownership as an equity position in the company and will be entitled to dividends and liquidity in the public markets for buying and selling the position. With real assets, they typically have a value that’s separate from valuations that are derived from money’s value, which can make it a great way to defend against inflation.
There’s gold in them hills
Among the many real assets to consider, gold has proven time and again to be one of the best ways to protect your portfolio when stock markets fail. It’s been used as currency for thousands of years, while other forms such as livestock, stones and even tulips (one of history’s biggest bubbles) have come and gone. Gold has withstood history, maintaining its inherent value, and unlike cash, it’s finite. All forms of paper money, whether it’s the yen, dollars or euros, have a potentially unlimited supply as all it takes it turning on the printing press for it to be made. Paper money can be printed again and again until it becomes worthless, which is what can happen when too much is printed out. Governments can’t print gold, so it’s something that holds real value, a true ‘real asset’ that can help keep your portfolio protected.
Real Estate = Real Money
Owning real estate can be a fantastic store of value to hedge against inflation. Buying a rental property can also offer relatively consistent cash for investors looking for income, though it can also be time-consuming and come with unexpected added expenses. Think about issues like having to install a new water heater, making expensive repairs or having to deal with problem tenants. Still, many investors have made excellent income by investing in rental properties. According to Forbes.com, over 2,650 individuals enter the rental market every single day, making it a great time to be a landlord, with rentals flourishing and rents increasing. The demand has been exceeding supply, so you’ll have more applicants to choose from, a better chance of finding a good tenant, and greater odds for increasing your profits.
Pretty neat info right?! I hope you enjoyed this financial post. Let me know your thoughts in the comments.
I’ll see you around the city soon!