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How to Invest Smart Against Inflation in 2022?

mymegaportfolio.com Real estate investing , 25 Comments

If you have noticed that your grocery bills have increased since the last time, even if you are buying the same items, then you are experiencing an inflation surge in your country. 

Prices continue to go up, but the worst part is we don’t know when they will stop, making us financially unstable and vulnerable. 

But we are sharing some advice with you on how to invest smartly against inflation in the modern day to avoid any big hits to your wallet when spending. 

Consider Investing in Real Estate

Investors in real estate tend to benefit from a natural hedge against rising prices. It is because leases tend to reset higher periodically. With the rising prices, housing stays in short supply, and wages keep increasing, which makes housing still affordable. 

With the upward trend in e-commerce too, the need for more storage and warehouses tends to increase. And remote-work migration is creating more opportunities. You can invest through private markets or Publicly Traded Real Estate Investment Trusts. 

Apart from that, you can also rely on equities, especially the cyclical ones, to ensure capital appreciation for further investment into real estate. 

Equities tend to do pretty well during inflation as corporate earnings are strong. Corporations with pricing power in materials or industrials experience robust revenue growth.

Also, focus on avoiding excess cash and consider borrowing. It is because 80 percent of assets in Long-Term Capital Market Assumptions have a higher rate of expected returns than inflation. 

You need to defend your purchasing power and avoid excess cash by investing it in a portfolio suitable to your goals and the time horizon. 

Bowring can be a good option in such a scenario because interest rates are still low compared to inflation. A mortgage can be a pretty simple way to take advantage of a roaring housing market. 

But you have to be careful because rising inflation also influences real estate investments. And the reason is that your money is losing its purchasing power. But it does help the real estate investors in the long run because you are putting your money in the game. 

If you’re a residential property owner and it is not generating any cash flow for you, you are a lazy equity property owner. But if you own a rental property that is generating cash flow, then it’s an asset, and you are a real estate investor. 

With inflation, real estate value increases, and so do the rents. Moreover, your debt is getting cheaper due to the decreasing value of money with the inflation rise.  

Do a Good Research & Focus on Asset Classes for Protection Against Inflation

Your money won’t be able to buy the same values of goods after ten years that it can buy today. This occurs due to inflation, which can result from increased raw materials, wages, etc. 

There are different ways to hedge against inflation. 

  • You can invest in different asset classes, and gold is at the top. Gold has always been considered a hedge against inflation, and many people consider it to be an alternative currency, especially in countries where the currency is losing its value. 
  • Commodities are another option, and it is a broad category. It includes precious metals, grain, oil, electricity, orange juice, beef, gas, emissions, foreign currencies, and various other financial instruments. You can invest in these commodities using exchange-traded funds.
  • You can also look to develop a 60-40 stock-bond portfolio as it is considered to be safe. Hence, you can invest in Dimensional DFA Global Allocation (DGSIX) if you don’t want to manage it on your own. 
  • Real Estate Investment Trusts or REITs are another good option as these companies operate or own income-producing real estate and pay out dividends to their investors. 
  • Investing in stocks of the S&P 500 also has an advantage in the long run. These are the businesses that gain from inflation and need less capital. 
  • Going for real estate income is another good option as you rent out a property that you own. 

It’s a Good Time to Buy Some Good Stocks at a Very Low Price

You have to be careful with stocks because they can serve pretty well as a hedge in the long run but suffer in the short run with inflation spikes. But if you are new to the trading world, it’s pretty easy to get started. 

You will only have to open an account on a trading or brokerage platform and choose from many online brokers with zero commission trading.

Look for the best options with the widest trading choices, high-quality customer support, and better technological resources. Here are some of the best options for you to consider:

Conclusion

There are various choices you can make to protect yourself from inflations. You can go the trusty old real estate route or invest in different commodities or stocks. 

You can also use the inflation period to assess the overall performance of your assets and investments. But keep in mind not to make any dramatic changes based on current inflation, especially if you are a long-term investor. 

What does blockchain technology bring to cryptocurrencies and how should we invest in it?

mymegaportfolio.com Cryptocurrencies , , 0 Comment

Blockchain technology also called the “chain of blocks” brings multiple benefits and not only to cryptocurrencies and the financial sector but also to other sectors. It is the foundation that supports the structure of virtual currencies. It has great potential, which has provided its great evolution. The future that experts predict for blockchain technology is far from a failure, as the expectations placed on it are enormous. It only needs to successfully survive the obstacles that lie ahead and those who use it to instill fear in society by speaking ill of this technology.

It is one of the most revolutionary technologies of the century, but do we know what blockchain is?

The technology sector is advancing by leaps and bounds. Until recently, it was difficult to think of autonomous cars, smart homes, virtual reality simulators, or social media. All of them have meant, to a greater or lesser extent, a revolution in each of their areas. However, none of them have had the repercussion and impact that the blockchain, also known as the blockchain, currently has. It is, without a doubt, the most disruptive technology of this century. A concept that has revolutionized many industries and areas of our day to day and in which you can also invest. But do you know what it is and how to invest in this technology?

WHAT IS BLOCKCHAIN TECHNOLOGY

Let’s start at the beginning: What is this blockchain? The blockchain is nothing more than a decentralized information system that grows continuously, a kind of distributed and secure database that guarantees the privacy of transactions. In the blockchain, the blocks are all linked to each other and encrypted to protect the security of the users. Your most important requirement is that multiple users are validating these transactions so that they can be inserted into this huge ledger.

THE APPLICATIONS OF THE BLOCKCHAIN

Although the largest field of application of the blockchain is economic transactions, the truth is that this technology encompasses many more potential ideas. For example, the Japanese government has started a project to unify all urban and rustic property registration through blockchain. Some companies want to decentralize cloud storage so that it does not depend on a specific centralized provider. Another example is healthcare, in which the medical records of all patients could be stored through the blockchain. In reality, the potential of blockchain is practically limitless.

HOW TO INVEST IN BLOCKCHAIN

When we think about investing in blockchain, we are not talking about doing it directly in this technology, but about buying assets or securities that make use of it. These are some of the most interesting alternatives today.

Cryptocurrencies

Cryptocurrencies are undoubtedly the best-known use of blockchain technology. Their popularity has been growing over the last few years thanks to the guarantee of security and anonymity that they incorporate in transactions over the Internet. 

The best known is Bitcoin, but there are others such as Ethereum, Ripple, Litecoin, or Cardan. Currently, more than 1,300 different ones can be found. At the investment level, cryptocurrencies are characterized by their high volatility, in some cases higher than 80%. 

This makes them considered a high-risk asset and not very suitable for retail investors, as stated by the Security Exchange Commission (SEC). There are two options for investing in cryptocurrencies: buy them or mine them. 

The first option is the most common and consists of getting the cryptocurrencies in the market. The second option is to create new coins and register them on the blockchain. However, it is an increasingly residual alternative, because the processing capacity to mine new cryptocurrencies is increasingly expensive. 

In any case, it is the user who can do it directly without resorting to an intermediate figure. In the case of the purchase of cryptocurrencies, you only need a virtual wallet to acquire them that provides access to the blockchain of those cryptocurrencies. In the case of mining, you just need to install software on the computer and let it work autonomously. 

ETFs 

ETFs (Exchange Traded Funds) are investment funds that contain a set of securities that replicate an index. There are already indexes that allow exposure to the blockchain. Some of the most interesting ETFs to invest in blockchain and their returns are as follows.

Stocks of large companies 

Large companies are betting heavily on blockchain technology. Companies such as Microsoft, Visa, and, above all, IBM, are developing solutions based on block technology. In general, almost any company that is listed on the Nasdaq, America’s tech stock index par excellence, has some kind of blockchain-based solution. So, if you want to invest in blockchain without having to assume the volatility that characterizes this sector and in a much more accessible way, it is advisable to bet on consolidated companies in the technology sector that are developing this technology. 

Cryptocurrency ICOs 

The Initial Coin Offering (ICO) or Initial Coin Offerings are a financing mechanism through which a company seeks to raise capital through cryptocurrencies such as Bitcoin or Ethereum. A kind of public offer for sale or business crowdfunding project that has a peculiarity: It uses the blockchain in the entire process of attracting economic resources. Its operation is simple. 

A project issues a certain amount of crypto assets or virtual tokens on a blockchain platform and investors pay through cryptocurrencies. If the project goes ahead and succeeds, the cryptocurrencies on which its financing was based gain value and that ends up offering an interesting return on investment for all these investors. The growth of ICOs has been spectacular. 

According to data from the ICO Bench, projects worth $ 1.2 billion were financed in May 2019 alone, and applications such as Telegram managed to raise $ 1.7 billion in several rounds. The returns are, in some cases, spectacular and far from those that can be obtained by any other traditional investment. The five most successful ICOs in history in terms of return on initial investment have been, according to Cointelegraph:

  • NXT, with profitability of 11,547,519%.
  • Spectercoin, with profitability of 676.227%.
  • IOTA, with profitability of 522,900%.
  • Ethereum, with profitability of 442,869%.
  • Neo, with the profitability of 378,453%.

HOW BLOCKCHAIN’S EARNINGS WILL BE DECLARED

Although there is no specific regulation on the blockchain, as of today, assets such as cryptocurrencies are considered intangible assets for the Treasury. This category is the same as that used for web domains, farm exploitation rights, or the transfer of a bar. But what do you do when you convert your investment in cryptocurrencies or other blockchain-related assets to money? 

Well, the same thing we do with any other investment: Declare them in our income statement, incorporating capital gains into the tax base of savings. The amount that you will have to pay to the Treasury is obtained by subtracting the transmission value from the acquisition value, excluding expenses and commissions. The corresponding savings rates are applied to this value, which in 2019 are as follows:

If the investor is a legal person (for example, a limited company), the profits obtained are included in the tax base of the corporation tax, which has a tax rate of 25% on the profits of the company. In short, the blockchain is here to stay. More and more solutions based on this blockchain technology and its applications will continue to grow in the future. Given this reality, investing in blockchain is an interesting option, although, yes, as long as we assess the risks associated with such an incipient concept.