No one knows what the future will bring. One thing that is certain, having a firm financial background will help us keep our family safe and secure and ensure that we’ll be able to face any challenges. Amid the pandemic, the threat of the third world war, and fears of a global recession, it could be extremely challenging to pick the right assets to ensure a bright financial future for yourself and the whole family. In this article, our team set out to showcase investment options that have stood the test of time and will give you the best chance to achieve your goals.
Invest long-term
As the golden rule of long-term investing says: “it’s not about timing the market, but about time in the market”. Countless research has proven that passive investors, who are not trying to pick the tops and bottoms and stay invested for longer periods of time, have been constantly outperforming those who do the opposite. To be blunt, no one knows what will happen in the next months and years in the markets. Whoever says otherwise is either delusional or just trying to get in your pocket. On the other hand, making long-term predictions is fairly easy and can be done with decent certainty. Maybe we are heading into a recession, and maybe there will be other global pandemics, but we can still make smart investment decisions that are highly likely to do well in the long run.
Why you should hold hard precious metals?
Precious metals as a form of money and investment date back thousands of years. Metals such as gold and silver have been regarded as the ‘soundest form of money’ for ages. They are considered the best hedge against recession and have been historically outperforming many other assets, especially in high inflationary periods. While keeping your whole net worth in these metals is certainly not recommended, most serious investors dedicate 1-10% of their portfolio to ensure having purchasing power, in case the economy collapses. While a global economic meltdown is unlikely, in case it happens, you’ll be greatly rewarded for being prepared.
Why you should hold hard assets
Besides precious metals, there are several other so-called hard assets that can prove to be a great long-term investment. Holding assets such as real estate, commodities such as oil or natural gas, collectibles, classic cars, and art pieces are becoming more and more popular among conscientious investors. Many prefer these alternative forms of investments due to their tangibility and physicality. They can also add diversity to a traditional investment portfolio of stock and fixed-income instruments. These are typically considered the ‘sit back and relax’ type of investments that you are unlikely to regret in the long run. Big proponents of hard assets argue that while ‘soft assets’ can be endlessly reproduced, hard assets are limited by nature and due to this, they are bound to outperform their counterparts in the long run. The number of plots for real estate is limited, natural resources that can be extracted are not endless, there will never be new 67 Mustangs made and we can also be sure that Picasso won’t crawl out of his grave to make new paintings, devaluing the current ones.
Hold art, classic vehicles, and collectibles as a hedge against the financial system
No matter what the future hold for the world economy, no matter whether the currency will be gold, Bitcoin, or even coffee beans, there will be people who will benefit from the world order. Even in an apocalyptic scenario, an elite class will emerge, and members of this group will certainly appreciate, art, beauty, and the historical value of different collectibles. The point is, that these items do not correlate to other, more traditional forms of investments and due to this trait, could be valuable assets to your current investment portfolio.
The demand for collectibles has been constantly rising. Making investments in historically important pieces – whether these are comic books, stamps, coins, paintings, or muscle cars – has been producing insane returns for some. A 1938 copy of Action Comics #1 was sold in 2014 for a mind-boggling $3.21 million. While buying already highly appreciated paintings from famous artists or first editions of 90-year-old comics is probably out of the question for most, you can make smaller, smart bets on pieces that will likely appreciate in the future. For example, in every country, there are limited edition coins issued every year. Usually, these can be directly bought from the government institution and are sold on a first-come, first-served basis. Garage sales can also be great places to find treasures that have long-term historical value.
If you are willing to invest a substantial amount in art, classic vehicles, or collectibles, we highly recommend you consult a professional. Since it is a widely lucrative space, it attracts many scammers due to most people having very limited knowledge about the field. Remember, if a deal looks too good to be true, it probably is.
Hold dividend stocks or high-yield ETFs
Holding a portfolio of stocks that are constantly paying an increasing dividend is probably the most popular way to ensure financial freedom nowadays. It is considered the tried-and-true way of building generational wealth. Unfortunately, it is easier said than done. While picking good, so-called ‘dividend champions’ is easy, knowing when to buy or in rare cases, when to get rid of them can be immensely challenging. Due to the nature of the stock market, the best buying opportunities arise, when there is panic in the market, while selling should mostly be done at times, when euphoria kicks in and most are buying the stock hand over fist. Only those who are willing to invest the necessary time to learn should attempt to build such a portfolio by themselves. If you need help picking the right stocks for you, we highly recommend subscribing to The Falcon Method. The owner, David will not only provide excellent stock recommendations, but he will also support your journey with educational content in his highly regarded newsletter.
If you do not wish to dedicate a substantial amount of time to investing, ETFs are meant for you. ETF stands for Exchange-Traded Fund and contains funds that track specific indexes like the NASDAQ or the S&P 500. By investing in an ETF, you receive a bundle of assets, which will provide exposure to a diversified collection of equities. ETFs tend to be less volatile and considered lower risk compared to other investment alternatives. Compared to stocks, ETFs also benefit from substantially lower fees and have some tax advantages as well. Our team has dedicated a whole article to this topic. If you haven’t checked it out already, and are interested in finding ones that will grant you instant passive income, read our article titled: The fastest ways to earn passive income immediately
Refinance your property to buy another one for renting
Investing in real estate has always been a popular form of investing. If you have a wholly-owned piece of real estate, free of mortgage, you should consider refinancing it to buy another one for renting. Smart investors are often able to rent the place for a higher fee than what they are paying for the bank, hence instantly having a net positive cash flow investment. Do not rush to purchase the first one you see on the market though, since rental yields can widely vary from 2% all the way up to around 20%. Be sure to do your research, check the regional prices, trends of rental fees, and tax obligations in that specific region. Although paying for the consultation fee of a true professional real estate investor might seem way too expensive, it can save you a lot of headache by helping you select the right property fitting your individual needs.
Conclusion
In this short article, we introduced you to some of the most popular asset classes to invest in to build generational wealth. We believe any of them have the potential to ultimately lead to financial freedom, but combining them is probably the smartest way to invest. Markets tend to move in cycles and often the asset classes mentioned are not positively correlated, meaning that if you have a portfolio that is exposed to all the mentioned asset classes above, no matter the cycle, some of your investments will be doing exceptionally well. A more advanced strategy could be moving your wealth based on the cycles. Let’s say there is a housing bubble, while at the same time the stock market is significantly down. This might be the best time to sell your property and heavily invest in quality stocks or ETFs. If there is a financial crisis where hard assets tend to do extremely well, while real estate suffers, it might be best to sell some of those overprice precious metals you have been holding onto and buy real estate dirt cheap. All in all, if you are exposed to all these asset classes, you’ll be guaranteed to do well long term.