An asset is a resource of economic value that an individual, corporation,
or country possesses or controls in the hope of reaping future benefits.
Cash is a secure asset, but a horrible one to hold due to inflation. Inflation can be defined as the
rate at which a currency's value declines and losses its purchasing power. In the recent past,
with the covid outbreak and the ongoing war in Ukraine, the inflation rates are persistently
rising, and thus people are looking for ways to secure their hard-earned cash. Therefore,
in this practical wisdom video, we'll be looking at ten assets that are always better than cash.
The first asset on our list, is:
LAND. For two
simple reasons, land is categorically and objectively an appreciating asset.
The world's population is growing exponentially every year, and only a finite amount of land is
available and suitable for living and use. New land cannot be created, making it a very
appealing commodity. As a result, the most basic economic theory of supply and demand
dictates that land will inevitably increase in value as demand for the finite asset grows.
It's no longer a question of whether or not land would appreciate,
but rather by how much. One of the most compelling reasons to invest in land right now
is the diversification benefits it provides to investment portfolios.
Investors have begun to increase their land portfolio to shield themselves against market
risks because returns are generally steady and have a low correlation with other asset classes.
Take for example, Bill Gate. Bill Gates became America's largest private farmland owner with a
whopping 242,000 acres spread over eleven states, according to The Land Report in January 2021.
Coming from one of the world's wealthiest individuals, this speaks volumes about
land as an asset. Land as an asset also serves as an excellent inflation hedge,
with yearly prices in the United States rising at their fastest rate in almost 40 years.
2. STOCKS Stocks are securities
that represent part ownership in a company in the hopes that the company grows and earns profits.
Stocks stay resilient during periods of inflation and major conflicts or disasters
because most company portfolios are heavily weighted in equities that tend to be more elastic.
Stock market investing is a long-term proposition.
A solid rule of thumb is to diversify your investment portfolio by investing in
different industries to ensure a fall in one industry doesn’t destroy all your portfolio.
The other option is investing in Index funds which track a benchmark index like the S&P
500 or the Nasdaq 100. When you invest in an index fund, your money is spread across all of the firms
that make up the index, giving you a more varied portfolio than if you bought individual stocks.
Putting money into an online investment account,
which can then be used to invest in stock shares or stock mutual funds from all over the world,
is one of the best ways for beginners to start investing in the stock market.
3. REAL ESTATE Despite rising interest rates,
real estate continues to be one of the best small businesses and personal prospects available.
Real estate is, in fact, a fantastic investment and asset. Purchasing,
owning, maintaining, and eventually trading up investment property tends to be a safe bet.
Real estate always appreciates over time just as land. Owning property provides dependable
income from monthly rental payments, plus it offers generational wealth as it can be passed
down from generation to generation because it's a tangible asset. Real estate can be for commercial,
residential, industrial and special purposes, generally used for setting up social amenities.
4. CRYPTOCURRENCY Cryptocurrencies are digital currencies
taking the world by storm as more and more people are moving in this new direction.
The leading cryptocurrency is bitcoin, which is estimated to be worth roughly about $30,000 USD,
as of mid-May 2022 for one coin. Bitcoin becoming more sought after due to its decentralized nature,
and its limited supply. Other cryptocurrencies worth investing in are altcoins, which are other
coins other than bitcoin, such as dodge coin, Ethereum and polkadot, just to name a few.
Digital currenccies are slowly being embraced and accepted by governments as seen by US president,
Joe Biden signing an executive order that plans on looking into environmental impact
of mining digital currencies, and setting regulations to curb its usage by criminals,
terrorists and money launderers.
In addition, Biden encouraged the government to
research a proposal to create digital currency of its own.
While a digital dollar would not be as volatile as bitcoin,
the mechanics of utilizing it would be similar: A government-backed digital coin,
like crypto, would almost certainly use a ledger and digital wallets.
5.ART Have you ever wondered why the rich buy art?
Well, it’s not because they like the product, although most do. The Wall Street Journal called
the art market “one of the hottest markets on Earth,” and that contemporary art prices
have outperformed the S&P by 174% from 1995 to 2020. Also, it has very limited correlation to
any major asset class, meaning it is a strong diversification instrument in one’s portfolio.
On top of that, the total wealth held in art is estimated to be worth $1.7 trillion,
and Deloitte projects it to grow: $900 billion by 2026.
The only problem with the art market is its huge barrier to entry. I don’t know about you, but I
don’t have millions of dollars to buy a painting. Well, thanks to today’s sponsor, investors
like me and you can now invest in the top of the line art market.
Masterworks has solidified itself as the premier art investment platform,
leveraging technology and finance to allow anyone the opportunity to invest
in multi-million-dollar iconic artwork from artist like Banksy, Picasso, and Basquiat.
With masterworks, you can invest in shares that represent an investment in artwork. Since 2020,
Masterworks has sold three paintings, with each returning over 30 percent net IRR to investors,
and their new offerings usually sell out in hours.
As with all investments, your capital is at risk. The value of your portfolio
can go down as well as up, and you may get back less than what you invested.
All you need to do to add these assets to your portfolio is just go to the
website using my link below to create an account. After that,
you can browse their selections of artworks, and invest in any of their current offering.
Just like you would trade stocks on your phone, you can do that at masterworks.
From there you can either hold your shares until masterworks sells the painting
or sell your shares on their secondary market. So, join the platform now and skip the
waitlist by clicking the link in the description below. And as always,
in everything related to investment, tread carefully. Nothing is risk free.
6.NFTs NFTs are quite
a controversial and debated asset, not a lot of people really knows their worth and value
or even use, but nonetheless, some of these NFTs have sold for thousands and millions. So I think
it's worth having a look, especially in a future where you will probably be seeing a lot of them.
According to wikipedia, A non-fungible token is a financial security consisting of digital
data stored in a blockchain, a form of distributed ledger.
Non-fungible tokens (NFTs) have gained popularity as a rewarding investment choice.
Many artistic and creative things are now selling for exorbitant amounts,
with small inventors, crafters, and artists making millions of dollars.
Some of the astounding art pieces being sold for $11.75 million from a starting bid of $2 million.
The most well-known NFTs collections you might have heard of include bored ape yacht club,
doodles, and cryptopunks, just to mention but a few. Not only does it apply to artists but
this opens up the possibility of owning something on the internet,
which can be a game-changer when it comes to copyrights and royalties.
It's important to note that NFTs rely on the law of supply and demand. Thus supply is dependent
on whether people are willing to pay. The important thing to know about NFTs is that,
they can permanently and securely record ownership of any asset, in a verifiable manner. Something
that was previously impossible – making them highly tradeable. With the digital world coming up
such as the metaverse, one can own permanent land or art to be used in the metaverse.
7. PRECIOUS METALS Precious metals are renowned metals such as gold,
silver, and platinum. Before the current fiat monetary system that is used all over the world,
most currencies were backed by these precious metals. For many centuries, the world followed
the gold standard, which allowed people to swap their money for gold immediately.
A country that adhered to the gold standard established a fixed price for gold
and bought and sold it at that price. That set price determined the value of the money.
This system was called representative money but ended after the great depression.
However, these metals are valuable because these minerals are generated in limited quantities each
year. Their value is based on scarcity. Buying the actual metals is the most refined approach
to investing in precious metals. Coin dealers all throughout the world sell gold, silver, platinum,
and palladium, in the form of bars and coins. However, their prices do change with the supply
and demand in the market. Purchasing shares of firms involved in the mining and manufacturing of
actual metals is an alternative way to participate in the precious metals markets. When metal prices
rise, these stocks rise, and when they fall, they tend to dip too. Those who invest in
mining stocks, however, take on additional risks in addition to the metals' pricing.
8. VINTAGE CARS Vintage car collecting is
becoming increasingly popular. Can you imagine your old muscle car, German coupe, or British
roadster being your weekend cruiser and bringing you some money? Many other investment kinds, such
as collectables, art, furniture, and jewellery, have performed better than antique cars. However,
vintage cars are still a great investment if you have the right car and the right buyer.
9. LUXURY PIECES From high-end watches
and jewellery to the most expensive wines and spirits, luxury and rare pieces are a great asset.
However, these investments demand a significant level of information to choose pieces that will
provide you with a good return. You’ve probably seen most celebrities with their flashy Rolex,
Patek watches, and Hermes Birkin bags. Well, these precious pieces are part of their broad
portfolios. Some pieces, such as the Audemars Piguet watch, fetches nearly as much as 10%
per year, which thrashes the S&P 500 return of 8% annually.
10.BONDS Bonds are a fantastic way to generate income.
A bond is nothing but a promissory note. It enables you to lend money to businesses, state,
federal governments, and local governments. Bonds give investors much-needed stability in the face
of unpredictability. Bonds are a generally secure financial investments that are frequently used to
balance a portfolio, especially when compared to the volatility of other assets such as equities.
Bonds offer long term investment opportunities that give fixed interest. Bonds are referred
to as fixed-income since the payments are normally fixed and can provide investors with
a consistent cash flow. Bonds are popular among investors because of their earning potential.
The global bond market exceeds the global stock market in size., thus making it more lucrative.
What I just showed you are some assets that are better than cash, but choosing one or
more that will suit your portfolio depends on research, preference and your financial advisor.
Investing in income-generating assets,
or assets that generate cash flow is a strategy used by many successful people.
And diversifying your income sources is one of the best methods to build a financial cushion.
With that being said, have a good one and see you in the next video.