Be Financially Prepared for the Inevitable Financial Slowdown.
2018 has seen record breaking economic growth in key markets. Under the current administration, the stock market has reached all time highs, GDP is above 4%, consumer confidence is at an 18 year high, and the current US economy is blistering. Now is a good time to be an investor.
However, a smart investor will always be thinking about and preparing for the cyclic nature of the market, when it begins to slump, or even crash. Portfolio diversification of your investments, whether in the stock market or self-directed IRA will certainly help as these are some of the best assets to own during these times.
The long term value of real estate typically depends upon the local economy. Buying, selling, and renting real estate for investment and profit will always hinge on the right deal in the right location. Debt free real estate will always hold value even during a depressed financial market. The demand for housing, especially in metropolitan areas in the US is rapidly growing making buying real estate as a financial investment a great way to hedge against inflation. Buying real estate in up and coming markets can lead to some huge financial gains if the local economy is growing at the same pace as the housing market. We’ve seen median single family home prices in areas like Seattle, Boise, San Francisco and even Portland rise by as much as 40% over the last several years with no sign of slowing down any time soon.
Gold & Cash
Even during a booming economy, like we’re seeing today, it’s always a good idea to have at least 3 times your monthly living expenses put aside in an easily accessible savings account. Should anything happen to your bank during these times, they are federally insured (FDIC) and you will be covered upto $250,000 against bank losses or insolvency.
With inflation quickly lowering the value of cash, owning gold is also wise. Investing into scarce, precious metals like Gold will always be a smart move because having access to cash for any scenario should never be overlooked. As we’ve seen in the past, when the economy suffers, the price or value of gold either goes up, or at the very least remains constant.
Treasury bills, also known as "T-bills," are a security issued by the U.S. government. When you buy one, you are essentially lending money to the government. Here, the term security means any medium used for investment, such as bills, stocks, or bonds.
Treasury bills have a face value of a certain amount, which is what they are actually worth. But they are sold for less. For example, a bill may be worth $10,000, but you would buy it for $9,600. Every bill has a specified maturity date, which is when you receive money back. The government then pays you the full price of the bill -- in this case $10,000 -- and you earn $400 from your investment. The amount that you earn is considered interest, or your payment for the loan of your money. The difference between the value of the bill and the amount you pay for it is called the discount rate, and is set as a percentage. In the example above, the discount rate is 4 percent, because $400 is 4 percent of $10,000.
Treasury bills are one of the safest forms of investment because they are backed by the U.S. government. They are considered risk-free. They are also used by many other governments throughout the world.
Putting aside some investment capital into offshore “safe havens” could protect you from an economic downturn. These assets are typically sold as depression-proof. This is because, if the US goes into a depression, the value of foreign currencies unaffected by an American depression will rise in comparison. Some of these investments include eurozone government bonds, such as the German bund.
Ettro Capital makes real estate investing simple. Our team of experts can help you get started with your real estate investment immediately and we are happy to answer any questions you may have about diversifying your portfolio to protect your assets against any upcoming financial downturns. Please click here to contact us if you would like to learn more.