Finding investments that remain stable during times of high inflation can be challenging. Even if growth occurs, it needs to outpace the ongoing erosion of the dollar — something that isn’t always possible.
To make matters worse, Bloomberg Economics model projections now have the potential of a recession in the next 12 months at a sobering 100%. Tossing a recession into the mix alongside inflationary woes can make deciding where to allocate your assets a paralyzing activity.
If you’re a business owner with cash to invest and you’re uncertain where to put it, here are three excellent investment options that tend to stay stable during inflationary periods.
1. Safeguard through bonds.
Economic challenges can create powerful opportunities to grow wealth in the stock market. Viable, healthy companies can see their stock value crater in the short term only to bounce back stronger down the road.
And yet, stocks are iconically volatile during tough times. Even predictable stock options, like the S&P 500 index fund, can still dip along with the rest of the market (albeit with less intensity).
If you’re looking for stable investments that remain stable, though, investing in stocks tends to be a bad idea. Instead, you may want to look into bonds as an alternative.
Bonds are, in essence, a loan. You give an entity your money, and they give you a bond, which they agree to pay back to you at a specific time. You also receive a preset amount of interest on each bond, usually paid in occasional installments.
Both companies and governments can issue bonds. If you’re looking for a safe bet against inflation, though, the Forbes Advisory Counsel suggests one of two options:
Treasury Inflation Protected Securities (or TIPS) are bonds designed to increase in value along with inflation.
I bonds are similar to TIPS except that rather than adjusting the value of the actual bond, it’s the interest rate that increases to keep up with inflation.
Both of these options are great ways to protect money from the ravages of inflation. However, keep in mind that if you tie up too much money in these kinds of bonds, it won’t be available to invest elsewhere if economic conditions improve. Treat it as one extremely solid foundational element of a larger, diversified portfolio.
2. Grow wealth through new real estate.
Bonds are a safe way to keep your money stable and on track when everything else is crumbling. Make no mistake, though, they don’t supercharge your investment strategy. Bonds are low risk, which means they’re naturally low reward, as well.
However, if you’re a committed investor, you may be looking further than simply maintaining your wealth. You want to grow it, too. And the good news is that there are stable investments that can do just that, in spite of inflation, and real estate is high on that list of options.
Real estate has been a stabilizing factor for investors for time out of mind. Since pharaohs started building pyramids, investors have understood the long-term benefits of investing in physical property. The ability for real estate to appreciate in value over time is also a factor.
If you want to invest money in a solid option with growth potential, there are a few real estate choices to choose from.
For instance, if you’re a business owner, it may be time to redirect some of your hard-earned cash into an expansion of your office or warehouse. This doubles the security of your investment.
First, it gives you a tangible piece of physical property that can hold its value. Second, it creates potential room for growth for your business.
3. Invest in real estate personally.
As a successful entrepreneur, you can also invest in your own personal pieces of residential real estate. The most direct way to do this is by purchasing a property to rent out. Becoming a landlord is a great way to generate steady passive income. Your investment remains tied up in something that doesn’t lose its value.
Flipping properties is also an option. As the market becomes saturated with homes for sale, many of the less desirable dwellings are being overlooked. Flipping a cheap house is a great way to make a predictable profit — especially as homebuyers continue to pay record sums over the asking price for well-kept, desirable properties.
If you don’t have the capital or time to invest in a larger project, there are still ways to get in on serious real estate investments. For instance, companies like RedSwan have tokenized the commercial real estate game, crowdsourcing real estate in the process. In essence, the startup has created real estate blockchain that you can purchase in tokenized amounts (i.e. you buy a tiny portion of a much larger property, as you would a stock). This approach to digital real estate allows smaller investors to get in on larger, profitable CRE (commercial real estate) investments with less up-front cash.
4. Invest in your business and your team.
If you’re uncertain how to invest in an unstable economy, look for ways to sow your profits right back into what you already know works: your business.
There are many ways to invest in a thriving business to help it grow. This was already touched on earlier in the form of building a new warehouse or office building. Investing in your business also includes things like creating new product lines and franchising. However, it should always start with a serious analysis of your team and if you’re collectively ready to scale your company.
The modern world is in a state of constant evolution. This makes embracing a “growth mindset” essential to maintaining your business’s cutting edge. Psychology Professor Carol Dweck coined the term, which means acknowledging that your talents aren’t innate or fixed and that you can develop them over time.
Embracing a Growth Mindset in Tough Times
One of the ways to actively embrace a growth mindset is by investing in ongoing training for your staff members. Where can you upskill your team’s current abilities? Do you need to reskill anyone into a different area of your company?
Another way to invest in your business is by focusing on hiring and retention. If you invest in your business, will you be ready to hire and onboard new members of your team? Do you have the tools in place to do so effectively and ensure that you find the best people for each position?
What about retention? Are there perks and benefits can you introduce to help you retain top talent? The last thing you want to do is have a recession strip away your best workers. Losing your key players will cripple the longevity of your enterprise.
These may sound like basic business activities, but they’re also extremely stable investments. The more you can cultivate a healthy business infrastructure, the better you’ll be able to thrive when the economy starts to pick up again.
5. Invest in yourself.
You saw this one coming, right? And no, this isn’t a pep talk to keep you focused as you face inflationary fears. It’s a genuine investment strategy.
Along with investing in your team and your business, it’s important to consider how you can invest in your own development. This can (and should) take several different areas into consideration:
Personal growth isn’t just meant to help you feel better about yourself. It’s a powerful way to impact your entire lifestyle. Growing in areas like self control, transparency, and communication are powerful attributes that can enhance other areas of your life — like your investment activities. If you’re able to stay disciplined, honest, and informed, you can find the best ways to navigate investing in the months ahead.
As a business owner, professional development is a loaded term. On the one hand, there’s the personal element of enhancing your own talents and skills. How can you invest in staying more up-to-date with current professional trends? On the other hand, you can also put time, effort, and resources into improving your professionalism as a leader and entrepreneur. Both investments are wise long-term plays to improve your wealth.
How can you hone your financial acumen and investing knowledge right here and now? Are there courses you can take? What about podcasts to listen to? Furthering your investing knowledge when things are unstable can help you see more opportunities and seize them with confidence both now and in the future.
It’s difficult to invest when times are tough. As crypto markets swing to and fro and stocks skyrocket and crash every other day, the fear of watching your money disappear in the chaos is very real. However, if you seek out stable investments, you can preserve and even increase your wealth.
Use bonds to introduce a measure of stability to your portfolio. Utilize real estate to potentially grow your wealth. And remember to invest in yourself, your team, and your business to grease the wheels for accelerated growth when the economy settles down and starts to pick up again.