The latest inflation numbers are out, and they are worse than expected. After record-setting increases in November and December, annual inflation hit 7.5% in January, higher than anticipated and highest since 1982.
While the markets tumble on inflation fears and now fears of a Russian invasion of Ukraine, not all investors are nervous.
There’s a segment of investors who were planning for inflation and now planning to profit from it. Where are they planning to put their money? In 2021, the levels of dry powder – an investment industry term for cash reserved for investment – hit a record $310 billion for private equity.
While mainstream investors flooded into the stock market and crypto with trillions in stimulus money, ultra-wealthy investors held steady – anticipating inflation in 2022. In 2022, they’re now mobilizing that cash into real estate and private equity.
Why?
During inflationary times, smart investors chase demand. What does that mean? There are assets, goods, and services that don’t go away when prices rise. Consumers are always going to need them and demand them. People will always need food, shelter, fuel, and places to work and shop. Even as the prices for these assets rise, demand remains steady – with some assets even experiencing a spike in demand.
Ultra-wealthy investors allocate to real estate and private equity to leverage inflation. While mainstream investors and the public fear and shrink in the face of inflation, savvy investors leverage it.
They allocate to real estate segments and to those income-producing private businesses (private equity) that thrive even as prices rise.
Smart investors saw the trillions of dollars from stimulus checks being pumped into the economy and knew the inevitable result – inflation. They prepared accordingly and are now breathing easier than investors in the stock market and crypto, who have seen massive declines since the beginning of the year.
As buying power diminishes because wages and salaries can’t keep up with inflation, you can protect yourself by profiting from inflation. You can protect yourself from a shrinking dollar by generating passive income from assets that keep pace with inflation.
On the real estate front, the proof is in the pudding. Even as we saw record inflation in 2021, we also saw record price increases in real estate sales and rents. Investors of those assets could insulate their portfolios from the damaging effects of inflation – with some even thriving and profiting from rising prices – more than investors in other asset classes.
Don’t fear inflation if you want to breathe easy during uncertain times. Profit from it.
