Recession and inflation are economic curses that (mostly) go hand in hand. A recession can happen when a country’s economy is on the ground for several months. Inflation is a precursor to a recession, affecting our expenses, savings, and investments. We’re experiencing inflation if we can’t buy the same amount of goods and services at the price we’re used to. In short, our purchasing power has shrunk painfully. Do we give in to economic distress or learn how to make money during inflation? Join us to discover the best investments for inflation protection and even how to profit from inflation!
As you’ll see, the housing market offers real value and a simple solution for what to invest in during inflation. Suppose buying and investing in an excellent real estate property in your area fascinates you. In that case, we suggest you get in touch with established local real estate agents. For the most outstanding results, contact realtors specializing in the most profitable real estate niches, for instance, commercial property investments.
Table of contents:
- What are the differences between inflation and recession?
- What should you invest in inflation? Real estate, of course!
- Purchasing a home implies numerous financial inflation-proof perks.
- Lucrative alternatives to what to invest in during inflation
- What’s the worst asset to own in inflation?
What are the differences between inflation and recession?
With inflation, products cost more, yet a healthy economy’s impressions remain. People still work, go on holidays, and do their daily shopping. On the other hand, once the effects of the recession set in, we will cut back on our overall liabilities, such as household expenses. Other recession symptoms are: layoffs will likely occur, finding a job will be almost impossible, and the cost of living will increase. Additionally, you’ll have to postpone your trip to the most charming US small towns indefinitely.
A recession affects the average consumer confidence, upsetting demand in an already battered economy. Note that the market isn’t showing a downward tendency in the United States. Besides, the supply has tightened. Thirdly, oil prices have risen due to President Biden’s ban on Russian oil imports. Therefore, we can’t speak about a recession.
Is the United States in inflation in 2023?
The United States is experiencing inflation, but the chances of a recession soon hitting the economy are slim. Nevertheless, suppose you’re worried about a prolonged period of economic downfall. In that case, we advise considering foolproof and smart investments during a recession.
The US inflation rate indicates a slight improvement over time.
Let’s analyze the US inflation rate during the previous couple of years (the rate at which costs rise over time)! We can conclude that 2021 brought a seven percent rate, the fastest yearly increase in over thirty years! This spectacular upsurge resulted from the ripple effects of the Covid-19 pandemic. Did you notice you had to pay more for transportation, gasoline, and meat?
Fortunately, the inflation rate was somewhat normalized in 2022, reaching 6.5 percent. The US Inflation Calculator reported that the rate improved to 6.4 percent in the first semester of 2023. But we’re still far from safe shores. Of course, you won’t feel a thing if you bet on the best investments for inflation protection. Let’s discover how to make smart investments during a recession!
There are no 100 percent “inflation-proof investments.” Due to countless variables, investments during inflation, recession, or otherwise can go sideways. For this reason, we suggest you contact a professional, such as a lending institution representative, broker, attorney, financial advisor, or real estate agent, before investing your hard-earned money! Our investment list for inflation protection is based on numerous studies published by experts, economists, and market analysts.
What should you invest in inflation? Real estate, of course!
Unsurprisingly, our top choice for the best inflation protection investments is real estate. Real estate safeguards your investment and provides the ideal solution regarding how to make money during inflation. Right off the bat, real estate and inflation have a rather complicated relationship. America’s central bank, the Federal Reserve, tries to get inflation under control with open market operations, like hiking the interest rate, moving federal funds and securities, stimulus money, and neighborhood rebirth programs.
How does inflation influence the real estate market?
The most evident impact of inflation on real estate are prices skyrocketing. You’ll see increasing rents in most US cities, large-scale retail development projects put on hold, and swollen property prices. The pandemic hit the rental real estate market in 2021, and the rent increased by 18 percent. That packed a heavy blow for renters, further worsening inflation. On the other hand, inflation actually conveyed a blessing for real estate investors.
The US market can’t keep up with the rising housing demand.
New constructions suffer the most from rising expenses. We must remember building materials cost more, as the prices of concrete, lumber, and drywall have increased. It’s no wonder the American housing market faces an acute shortage of cost-effective housing.
CNN Business surveyed the current housing supply and demand ratio. It concluded that about 6.5 million homes must be added to the market. You can imagine how the pricey new constructions boost the current property prices and rents.
Purchasing a home implies numerous financial inflation-proof perks.
Preparations for inflation start at home by reducing unnecessary expenses. Then, be ready to make the next-step commitment! Buying your first home in 2023 doesn’t sound like such a terrible idea, even during inflation (if you can finance it.) Keeping up with the mortgage payments will be easier than throwing money out of the window in the form of monthly rent. In the end, you get to keep the house!
Suppose you want to discover how to make money during inflation. Then, you must look into the most lucrative starter properties for investment! Many suffer from insufficient credit or lousy credit scores to afford a home. But efficient programs for first-time home buyers exist! You can apply for credit or buy a property via owner-financing, even during economic decline, because all of them are inflation-proof.
How about a little incentive? Renting out a house or apartment will bring you a steady monthly income. Did you know that residential properties are also the best investments for inflation protection?
Unconventional ideas for real estate investment during inflation
Real estate will always be the safest bet and surest answer for what to invest in during inflation! Once you own your asset (the first baby steps are the most challenging), you can genuinely get into business and, for instance, join the rental game. You can also expand your property investment portfolio by opting for untraditional ways of how to profit from inflation.
Let’s say you inherit a second home or successfully apply for a loan for investment property. In the latter case, the interest rate is about 0.75 percent higher than on your first home! You can use the new asset as a vacation home and Airbnb for short-term rent. Then, you can lease a piece of land to a tenant. Did you know managing or renting out warehouses can also be highly profitable?
Consider house flipping twice before jumping in during inflation!
Like lending money, where you can lose more than gain, house flipping isn’t recommended in terms of what to invest in during inflation. We know that local and national housing market trends for 2023 are pretty whimsical.
You pump money into an old building’s facelift and restoration. And when you get to sell it, you might be shocked to learn that it isn’t worth as much as you expected. Thus, you risk losing money on flipping and won’t answer your prayers about how to make money during inflation.
Where to buy a property? Tips and tricks
Many investors try their luck buying a new property in major American cities. Needless to say, the market has become fierce. For this reason, we advise you to look for the next best thing!
- Firstly, search for small but super family-friendly US places, commuter towns, that neighbor large metropolitan areas.
- Secondly, you can look into locations near which an event of great significance will take place, for instance, the 2026 FIFA World Cup in the USA.
- Thirdly, natural beauties and tourist attractions will always draw many visitors and potential homebuyers and renters, like the hidden gems in Florida.
So why not purchase the best investments for inflation protection with great potential? All you have to do is find a real estate agent, they can help locate these excellent properties you can rent out later! You can start advertising the area yourself by enlisting its many advantages to your future potential tenants. Hopefully, many will apply!
Lucrative alternatives to what to invest in during inflation
So far, we’ve covered one of the safest inflation-proof investments, the housing market. Let’s focus now on other profitable methods of how to make money during inflation!
Invest in dividend stocks with the highest yield!
For starters, look for assets that require low capital investment. You’ll find them as dividend-paying stocks available on stock markets. However, before investing in stocks, you must inform about the complex workings behind NASDAQ! Productive assets generate real value, profit, and cash flow even in inflation. By buying stocks, you lend money to the issuing company to develop its operations. So, hopefully, they will become more productive with up to ten percent dividend yield in the long run.
Based on Forbes Advisor’s report, we can advise you to investigate Extra Space Storage Inc. (EXR), Amgen Inc. (AMGN), and Mid-America Apartment Communities, Inc. (MAA) as potentially the highest dividend-paying stocks on the market for March 2023. Also, investing in company stocks with an established brand name, such as Coca-Cola and software firms, IBM, Apple, etc., is a terrific idea. Plus, it provides a fantastic key to how to make money during inflation.
IPs are excellent for creating a steady income and fending off inflation.
Intellectual properties are genuinely the best investments for inflation protection. Suppose you create a video, podcast, or song and upload it to YouTube and Spotify. You don’t have to put up additional money to keep it online. Moreover, your annual income from views and downloads will be re-assessed for inflation! You can cash your revenue in or invest it in expanding your intellectual portfolio.
Invest in your earning ability!
Be the best at what you do! Without being preachy, one of the best investments for inflation protection is spending money on your education and skill acquisition. A top-tier contractor, repairman, lawyer, and doctor will always find a job in town.
Under any circumstances, our society needs trained people with specific and irreplaceable fields of expertise. You can call them recession-proof jobs. IT personnel and department of education staff are only two examples of those jobs that will stand a chance against automation.
What’s the worst asset to own in inflation?
Suppose you’re seeking the ultimate answer to how to profit from inflation. In your despair, you might believe that keeping or exchanging your money in a foreign currency is the way. However, this couldn’t be more counter-productive! Inflation affects money the most. Inflationary trends and rising prices will severely depreciate the funds in your bank account. In other words, keeping your money under the mattress won’t be the key to how to make money during inflation!
Also, we don’t recommend assets denoted or bonds issued by governments with coupons in the inflated currency, either! By lending someone inflated money, you won’t hit the jackpot. Even with a high-interest rate, the sum you get back won’t be worth as much as you lent due to the high inflation rate. Keeping your money in gold, a non-productive asset, would be a more financially sound option since it’s not exposed to depreciation.
We’re living in an overly sensitive era from every imaginable aspect. The US economy struggles with inflation and an impending recession. Finding the best investments for inflation protection is truly difficult. Sitting on your money would be a seemingly effective alternative. Yet, money kept unused will depreciate in time thanks to growing prices. So, what to invest in during inflation?
Unquestionably, the most rational solution is to diversify your investment portfolio. Thus, you’ll still have other options if one investment takes a hit. We take the potential of the real estate market at face value. After all, people will always need a safe shelter. For instance, you can invest in a second property. Becoming a landlord in the top rental markets in the US or tinier cities with tremendous potential is how to make money during inflation! We also recommend investing in dividend-paying productive assets that have stood the test of time.
However, our best choice is education and improving your skills. Suppose you keep up with modern times and technological advancements and consider inflation-resistant jobs. In that case, you won’t expose yourself to inflation, economic hardships, downsizing, and layoffs!
Have you found another key to how to profit from inflation? Or have you uncovered a solution to what to invest in during inflation? Please engage with us in a meaningful conversation in the comment section below! And don’t forget to hit the like and share button!