Best Way To Profit From Inflation -- Buy Land.
Updated: Dec 26, 2020
The COVID-19 pandemic has led many countries to implement social distancing, lockdowns and travel restrictions, which have resulted in a collapse in the world economy unprecedented in peacetime. With a sharp fall in demand for goods and services, less economic activities also led to an increase in unemployment rate. Some obvious methods that the government has implemented to help is by lowering interest rates as well as executing quantitative easing (also known as money printing) .
Lower financing costs can encourage borrowing and investing since it is cheaper to borrow, and it is not worth saving in the bank anymore. When the inflation rate rises higher than the interest rate, savers will see a fall in the real value of their savings. Furthermore, when interest rates are too low, they can stimulate excessive growth and possibly causes inflation. Inflation increases the price of goods and services over time. Central banks are also seen to be executing quantitative easing by printing money and injecting them into the economy with the aim to increase economic activity. With more money being printed and inflation both happening, it will result in a currency depreciation where a dollar today will be worth more than a dollar tomorrow. So, what should investors look for to protect themselves against these outcomes?
Some investors might look at the stock market as high volatility means higher opportunity for bigger profits. However, companies listed on the stock market are too risky to invest in as recession might cause unexpected events to happen which will result in those companies suffering. Therefore, the best way to protect against inflation is by investing in land. This is said so because land is limited, you can’t increase it’s supply by printing or duplicating it like how the central banks prints money. Land is a limited resource, it is used for all kinds of activities, including shelter, agriculture, income generating business activities and even cremation or burial when a person dies.
Since it is still in a recession period, it actually represents a great opportunity for investors with capital to invest in land. This is because a recession typically leads to job losses and falling incomes, causing property price growth to slow or drop as people are less capable to buy. With growing population, unchanged supply of land, and on top of that, inflation, it is certain that land prices will only move in one direction, up. Once the Covid-19 vaccine is introduced, the economic recovery phase will happen where normally, during an economic recovery, gross domestic product (GDP) grows, incomes rise, and unemployment falls. As the economy rebounds, consumers start to regain their buying power, demand increases, and land prices will also be on the rise again. Therefore, this represents a great profit for investors who enter the land market during recession where the price of land is at its lowest.