In today’s current economy, there are a lot of shaky economic situations that could cause a domino effect on other countries such as Canada.
China has not been able to tighten up its federal reserve, thereby continuing to cause a money leakage issue. Greece is bankrupt, while France, Italy and Portugal are all teetering on the edge as well. Also, the US debt ceiling is at an all-time high and potentially even higher after December 9th, 2017.
Generally, the value of money continues to decline as the local government prints more money to service the debt. Meanwhile, inflation keeps increasing at record rates.
So what does that leave us with? As regular civilians, well that just means our money continues to be devalued and worth increasingly less.
I remember 20 years ago, when I walked by a 7/11 convenience store, gas was $0.50/L and I could buy a chocolate bar for $0.50, tax in! Gone are those days of glory. Now, wages have increased, but relatively oh-so-little as the cost of living has dramatically increased multiple folds compared to wages; I don’t’ expect this gap to shrink anytime soon.
So how do we prevent the money that we earn from being completely devalued? This may sound self-serving since I’m in real estate, but one of the best ways to protect your financial future (and your family’s financial future) is to own hard assets. Yes, that’s right – hard assets. It’s no secret, but hard assets will in fact retain their value as money is continuously being printed and devalued.
However, real estate is not the only hard asset you could own. Gold, silver, farmland, precious gems, natural oil and gas are all hard assets that one could also own. Though, many of those hard assets classes are much more difficult to own than others like real estate.
So why not own soft assets such as stocks and bonds? My firm belief is that soft assets could disappear overnight. If a company goes bankrupt, your shares in that company are worthless. Bonds are very similar. If the government decides to print money, the bonds get devalued overnight.
With a hard asset such as real estate, since you can touch and feel it, you would still be able to sell it for some value at the end of the day. Even if that value is less than what you purchased it for, you are able to still recoup some of your initial investment. Compared to stocks, if the market literally plummets, you could be left with absolutely nothing.
There are some quasi-hard assets that I’ve owned before, which I consider to be a decent secondary option. These are stocks in companies that own hard assets, such as real estate investment trust (REIT) and energy companies (Exxon). Should they get into financial troubles, at least they have hard assets to sell off.
So why am I talking about all of this? We cannot control how the government deals with this global economic crisis. Whether countries will continue to print money or eventually go bankrupt, that is really out of our immediate, direct control.
However, what we can control is how we protect ourselves from these situations and I sincerely believe that owning a diverse portfolio of hard assets is the way to go. These hard assets will protect our wages, savings and hard-earned money from being devalued by factors that are simply out of our control.