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Despite how long they’ve been around, using traditional money as a means of storing your wealth can have a few drawbacks. The main concern is that they’re often susceptible to inflation, the rate at which their value decreases while prices for goods and services continue to rise.
Inflation is a bane that many developing countries deal with. At that point, what alternatives do its citizens have? What can they do to protect their money? What hedges are there against inflation? What most people don’t know is that there are quite a few alternatives out there. Here are a few you can consider:
Gold
Being around for thousands of years, gold has long been considered to be a great hedge against inflation. Some even look at it as an “alternative currency,” especially in countries that are experiencing a high rate of inflation. It’s a real, physical asset that has shown its ability to hold value over time.
A good way to start hedging your money against inflation with gold is through ETFs. or exchange-traded funds. This way, you won’t have to actually own and keep the gold safe yourself. Another good thing about ETFs is that they can give you several options such as allowing you to own the actual gold or the stocks of gold miners.
Real estate
There are a few ways you can go about using real estate as a way to protect your money:
The first is through a REIT, or real estate investment trust. These are companies that operate and own income-producing real estate. The REITs themselves will usually consist of a pool of real estate that will pay out the dividends to all its investors.
The other way to go about it is through real estate income. To do this, you need to be renting out a property. This method works well with inflation because as inflation rates rise, so does the value of your property—meaning you can charge more for rent, earning you more rental income over time.
Bonds and stocks
Bonds and stocks are a great way for you to protect your money against inflation, provided that you look for the right companies to invest in.
When it comes to investing in a company, their profits will always determine how much you’ll be able to save. That’s why it’s important to look for companies that have high pricing power—even if their own costs rise, they’ll be able to raise prices on their customers. If inflation were to plague the market, the best companies, such as those that are paying dividends, will be able to power through it with their economics compared to others that might worry and crumble. Take a look at some of the best safe dividend stocks that you should be adding to your portfolio to hedge against inflation.
Refinanced loans
If you’re looking to refinance loans to protect your money, there are a couple of loan options that you can consider.
One of which is a leveraged loan, which is made to companies that have a low credit score or a high level of debt. Like most forms of investment, these kinds of loans are a trade-off of risks and rewards. If the company is able to pick themselves up and turn things around, it could lead to them paying you back with a good amount of interest. However, if things go south, it could lead to them not being able to pay you back.
The other method is through buying bank loans. This is a great example of some businesses being able to thrive during a time of inflation. For example, banks will be able to earn more from the increased prices of loans as interest rates rise.
These are just a few examples, so if you’re looking to take a deeper dive into this sort of protection, it’s best to do your own research into what’ll be best for your situation.
Bitcoin
Despite Bitcoin being only a little over a decade old, it has proven itself to be a viable means of wealth preservation. This means that you can safely buy Bitcoin with credit cards and use it as a money reserve or a means to protect the value of your money.
The biggest draw to using Bitcoin as protection against inflation is that it knows no borders. You can buy bitcoin on Moonpay and with it, you’re allowed to send and receive money to anyone, anywhere in the world. This allows you to have complete control over your money.
Using Bitcoin as a means of wealth preservation is most apparent in developing countries. During its earlier years, it was seen solely as a means of investment and something that’s “first world.” However, many countries have busted that myth and continue to use it for their real-world needs, including protecting their money against inflation.
There’s no denying that Bitcoin can sometimes be volatile, but if you’re using it in the way it was designed to be used—a peer-to-peer electronic cash system can that can be used to make more efficient payments—then there’s no need to worry about the price. Plus, you can always find a reliable Bitcoin calculator if you’re looking to make easier conversions.
Conclusion
All of these are great options if you’re looking to protect your money, but ultimately, the choice is yours. We’ve only provided a taste of what these could do, so make sure to do extra research if you’re leaning towards a specific option. In any case, more knowledge is always going to help you minimize the risks involved.
