How To Profit From the Upcoming Massive Inflation
Introduction
how to profit from the upcoming massive inflation. If you’ve been following our newsletter for a while, you’ll know that we have been discussing inflation for years, way before it became a popular topic. We believe that understanding inflation and its effects on the economy is crucial for making smart investment decisions. In this blog post, we will summarize the key points from the blog and explore three ways you can invest to profit from inflation.
1. Real Estate
Real estate has always been one of the best wealth-building tools, especially during times of inflation. In the United States, Americans have access to a 30-year fixed-rate mortgage, which allows them to lock in their interest and payments for the entire duration of the mortgage.
During times of inflation, real estate prices tend to keep up with or even outpace inflation rates. This means that your property’s value will increase over time, protecting your purchasing power. Let’s take an example to illustrate this. Suppose you buy a $100,000 house and put down a 20% down payment of $20,000. If inflation is at 10%, your property’s value could increase to $110,000 within a year. This means you’ve gained $10,000 in equity while protecting your purchasing power.
Another advantage of real estate is leverage. By using a mortgage to finance your property, you can amplify your returns. In our example, you only invested $20,000 but gained $10,000 in equity. This leverage can significantly increase your profits in the short term.
2. Real Estate Long Term
Now let’s look at the long-term effects of sustained inflation. With the increasing money supply and inflation rates, your dollar’s purchasing power will decrease over time. However, if you have a fixed-rate mortgage, your debt remains the same. This means you’ll be paying off your debt with future dollars that are worth less.
As long as your income keeps up with the rate of inflation, you’re essentially paying off debt with depreciating dollars. This creates a spread or profit for you. If your mortgage has a fixed interest rate of, let’s say, 2.5%, and your income is increasing by 10% per year, you have a spread of 7.5%. This spread allows you to benefit from inflation and pay off your debt more effectively.
3. Commodities
During times of inflation, investors often turn to physical goods, also known as commodities, as a hedge. Commodities like gold, silver, oil, natural gas, and agricultural products tend to increase in value during inflationary periods.
Investing in commodity ETFs can be a way to profit from inflation. For example, uranium ETFs, oil ETFs, and natural gas ETFs have shown significant gains over the past year. However, it’s essential to do thorough research and choose reliable ETFs that align with your investment goals.
Final Thoughts
Inflation is an important factor to consider when making investment decisions. Understanding how different assets perform during inflationary periods can help you capitalize on opportunities. Real estate, both short-term and long-term, and commodities are viable options to protect and even grow your wealth in times of rising inflation.
Remember, leverage can be a powerful tool, but it also comes with risks. Always be cautious when using leverage and ensure that your investments can weather economic fluctuations. Being proactive and staying informed about the economic landscape can help you make smart investment decisions and secure your financial future.
