5 Must-Have Investments When Inflation is High
Here are five investments you need to consider when inflation is high. There are steps you can be taking right now to invest in your
future security. A great way to start this process is by watching this video and learning how exactly you can be doing that.
And today we’re going to talk about five tips for investing when inflation is high. You can’t avoid the fact that there are a lot of people chasing around fewer goods right now. We have supply chain issues. We had this massive dump of cash during the pandemic and people’s savings accounts have never been higher. So you have people that are flush with cash and fewer items to purchase Which is doing what to those items. That’s the definition of inflation. It’s driving them up 7.5% if you listen to the government. But we all know for stuff that we’re actually buying it’s much, much higher. In fact, in many metropolitan areas, just rents alone are in the 15% range, 20% range. Prices of houses last year nationally went up 20%. It’s crazy. So here are the five areas that you go into. Number one, I just mentioned real estate. I just mentioned how the rents have been going up and prices have been going up. If you can get your hands on cash flow-positive real estate, meaning that it’s an asset. I buy it, I rent it. And even after the insurance, paying a property manager if I have to get one, covering repairs, covering any cost associated, including insurance, real estate taxes, all of that, then I’m still profitable. If I had to borrow money, you even factor that in, and if it’s net cash flow positive, That is a great investment, because inflation really pushes up, equity markets really pushes up real estate, always has, always will. Number two, since we mentioned equities, is investing in recession-proof companies. What type of companies am I talking about? You can look at your Walmart, Lowe’s your Targets, Apple, Adobe, and O’Reilly Auto Parts. Coca-Cola, love Coca-Cola. That’s one of Buffett’s favorites. Apple’s one of Buffett’s favorites. There’s a bunch in there, Johnson&Johnson, Kroger. People are still going to eat no matter what. They may not go out to dinner or a movie but they’re definitely only going to the grocery store. AT&T, we’re addicted to our phones. They’re not going anywhere, plus all that entertainment, all that good stuff even though AT&T has taken a few shots recently because they lowered their dividends, still a tremendous yield, over 4% yield. They’re not going anywhere. Royal Dutch Shell, if you like energy, next-era energy. Dollar Tree, even things like Altria and Molson Coors, kind of your sin companies. They always seem to do all right. If inflation is high, people are still doing those things. As far as entertaining themselves, they’re not going to deprive themselves of a decent beer. Another thing you could do is diversify your tax portfolio. Now the way that I diversify my portfolio is different than most. I still do this 30, 30, 30, 10. And what I mean is that diversification for a lot of people is they think, oh, I need to own an ETF and I’m going to have a whole bunch of companies, or I’m going to buy a bunch of mutual funds. The problem here is that you’re still exposing yourselves to equities, and you may have two mutual funds and they’re each 20%, and they’re the same company or companies, and you didn’t diversify well at all. So I use a different calculation. I do three main areas. I do income-producing, dividend-paying stocks. So equities that produce a dividend that pays out a profit. Those that have been historically good payers of dividends that increase their dividends every year. Those are what I look at. So for example, Coca-Cola, more than 55 years of increasing its dividend every single year, no matter whether we’re in a war, no matter what’s going on. These companies continue to pay out dividends. There are a ton of them that you can choose from. When I say a ton, like Dividend Kings, there are about 30. When you have Aristocrats, now you’re up to about 60. And when you look at what we kind of call our challengers or companies that are 10 years of increased dividend payout, you get around 100. It’s a ton of them, but it’s still a small universe. So it’s very easy for individual investors like me to go out there and kind of pick it out. And then I’m diversifying myself by going into those. The other area is where there are 30% in real estate, or real estate equivalents. And when I’m looking at real estate, Yes, I love single families. Yes, I love multifamily. I love commercials. I love self-storage. I like buying individual properties but maybe that’s not me. Maybe I’d like to do, instead, a real estate investment trust is a security that represents real estate that’s held in a holding company called a real estate investment trust. That’s paying out 90% every year of its income. That is a nice investment for me to get into where I’m exposed to real estate if I don’t want to manage my own real estate. Now I’m an avid real estate investor. I’m always going to do that, but I’m not saying you have to. Another area you could get into if you want to get exposed to real estate and you’re a high net worth individual that you qualify as an accredited investor, is you may invest in private placements where people are going in and buying buildings together. We’re binding groups of real estate. I’ve seen everything to build, rent, and sell storage, multifamily, and shared housing. I’ve seen it all this year and we’re going to see more of it because it’s such a huge issue. Statistically, we are under-built in real estate to the tune of about three to three and a half million units for the moderately housed. So lower-to-moderate-income housing, we are completely devoid, which means there’s a huge niche for shared housing. That’s going to be a big deal. You’re going to see private placements going into that At these little funds where they go in and they buy up land and put on rentals or they’re buying up buildings and doing remodel to put in shared housing. You’re going to see more of that going on. So that’s another one. Here’s the next area. By the way, for diversification, in the last section, the last 30% is managed portfolio. You’re either doing a mirrored portfolio like in our company, Infinity Investing, or you can go in a mirror. I think there are five different portfolios in there. And you’re just basically doing a group of different companies that you’re mirroring somebody else. So it’s not just you who’s making that decision. You start to lean on somebody else or you go to a registered investment advisor, we have those, too, where somebody’s charging you maybe 1% to manage a portfolio. The whole idea is that you’re stepping back from control and allowing somebody else to start making those calls, but without paying these exorbitant fees like that are in mutual funds and things like that Where it’s five to times as high. What I’d prefer is that you do something where if you’re mirroring a portfolio, it literally costs you nothing. You’re just saying, hey, here’s the portfolio. I’m just going to mirror this set portfolio and go about my business, the last 10%, so I go 30, 30, 30, 10. 10 is really cash or cash equivalence. That’s your goal in silver and crypto which we’ll get to here in a second. That’s where you’re putting a small amount Of your portfolio. That’s easy to liquidate fund that is available to you. And so it’s going to be US dollars. It might be silver. It might be some gold. It might be some Bitcoin, but it’s not going to be more than 10% of your total portfolio. All right, the next area we’re going to get into is to buy Treasury Inflation-Protected Securities. They’re called TIPS. And what it is is the principal is adjusted for inflation. So you may be using something like a Bloomberg methodology. You may be using some version of the CPI, but it’s the index for inflation on the principle of the bond that you’re buying. So let’s say that it’s a 1% yield and you’re like, oh that’s really great, but it’s indexed for inflation. So if inflation goes up, and let’s say it goes up 4%, well, your principal goes up 4%. And the 1% coupon rate is based on the principle. So let’s say that I put 1000 dollars into something. It’s indexed for inflation. It goes up 5%. So now I have $1,050, and I get 1% of that. So I’m going to get what? $10 and 50 cents on top of it. So overall I did okay. Hey, it’s better than sitting it in a savings plan which is next to nothing right now, right? There’s just nothing there. The interest rates are so low. You not making anything. This way at least I’m hedging myself against inflation. It’s called TIPS. And there’s a lot of money that’s been dumping into it Because people are scared of this inflation. So they’re running into that. How about precious metals, gold, and precious metals? So maybe I’m going to go into that realm. Now I’ll just tell you, not the biggest fan. I tend to like assets that pay me, so precious metals like gold and silver, I’m putting in that 10% sliver. The vast majority of my portfolio, 90% is in income-producing types of assets. But you can go in there to hedge against inflation. Speaking of hedging against inflation, a lot of people think Cryptocurrency is a great place to go if the US dollars get beat up, and inflation is causing problems. The only issue I have is that it seems to mirror that kind of inflationary numbers. Crypto, especially Bitcoins, reacted negatively when inflation numbers have come out and it’s like, whoa it seems to be tied there, even though instinctually you say it’s a hedge against inflation. I’m not saying don’t buy crypto. I’m just saying buy crypto, knowing that It hasn’t been doing exactly what it’s advertised to do. And that is that it seems to be affected when the inflation numbers come out. I’m not going to say don’t buy it. I’m going to say, keep it in that 10% realm. I own Bitcoin. I own Ethereum. I don’t see why everybody would not be exposed to some of that. The last area is options trading, one of the best things I can do if I have a portfolio that’s kind of stale. So I have a bunch of securities and I’m worried about inflation is they’re not going to jump up. By the way, avoid growth stocks like the plague during an inflationary cycle. One of the things we’re going to see to combat inflation is they’re going to raise interest rates and that makes it much more expensive to be a growth company, because they’re looking for debt and they’re looking for shareholders, right? The shareholders are buying their company to raise money. So they’re doing it through debt or shareholders. When shareholders no longer like it, guess what they’re going? They’re going to go out there and get debt and debt’s becoming more expensive. So avoid those. But if you do have companies that are good like you have good inflation-protected companies in recession-proof stocks, things like that where you’re not too worried about the overall economy. These are good companies. Again, your Walmart, your Lowe’s, your Targets your Coca-Colas, your AT&Ts, all these. One of the things that you can do is sell options on them. I’m not going to say buy options because I think that’s gambling. You sell options when you own the security. So I could even sell an option, if I like security, like, hey, I want to buy Walmart. I could sell a put, take that money in. And then if somebody puts me the stock it makes me buy it at my put price. I was going to buy the company anyway. So I just got it for a little bit cheaper because I got that little bit of premium there. So even if I’m like, hey I’d like to buy Walmart at whatever the price it is. I could sell a put for that. I get that extra money. Plus if I end up getting the stock put to me. Now I have it and I can sell an option on it and generate some more revenue that way. How much can you generate between six and 12% a year really on the sale of options? That’s what I’ve seen. That’s what we use inside of our Infinity portal is that we’re generally looking at companies Where there’s enough premium to make it worth buying them. And so now you have five good ideas to combat this in a high inflationary cycle. And then you’re not going to be looking at it going, oh, woe was me and jumping out of the market. Do not do that, please. Every time there’s a recession, people go out there and dump. Every time inflation’s going high, people start to freak out and they dump. Do not be that person because history has shown us one thing which is it’s all about the long term, baby. And nobody can time this. You just keep holding on to good companies and you wait. You take this right hand and stick it underneath that right butt cheek. Take your left hand, and put it underneath that left butt cheek. And sit on your hands and wait, because you get rewarded when you buy really good companies and you’re patient and you’re willing to go through these cycles. In the meantime, you have some other things you can diversify into or even ways to generate additional income Off of those companies, while you wait for whatever’s going to happen with this inflationary cycle, while you wait for the Fed to start jacking interest rates over and over and over again over the next year. That’s what you do is you say, hey, you know what I’m going to make money on in the meantime? And I’m going to protect myself. Here are some things I can get into. So I just gave you five. There’s obviously more, but if you get into those five areas, you’re not going to be disappointed. And you’re just going to go through this like a hot knife through butter. You’re going to be just as happy as a clam, going, geez I am so glad that I restructured myself or looked at it differently. And by the way, every time that there is a downturn look at it as if everything’s on sale. It’s a great buying opportunity to continue to increase your investments. And if you’re smart about it and you focus on those five areas, you’re going to be way ahead of the curve.
5 Must-Have Investments When Inflation is High