Honestly I keep the same investment strategy I had before and stay diversified (80% etf stock, 10% etf bond, 10% "maybe I'll never see the money back, whatever" crypto) and keep investing the same percentage of my salary (20% monthly)
I am looking at least to 20years from now before withdrawing something.
I don't know how much will last this inflation period, how big it will go, how it will affect the stock/crypto/bond market, whatever other "it will happen only every 50 years" absurd event will happen in the next years after a pandemic and a (let's hope almost) world war 3, etc... So it makes no sense to change my investment strat now if I can't even predict the situation in 3 months.
Ibonds have a $10k per person per year limit ($5k extra if you buy paper bonds with a tax refund), and if you use your kid’s SSN, it’s considered a gift to them. Things to keep in mind.
my farmland is doing great, up about 20% since i bought it last year. and currently produces a small annual income renting it out over the summer. a 2% dividend for doing nothing.
I can't speak to history, but I'm converting my cash into social capital. It won't directly get me more money, but I have a disability (MS) and therefore a variable-length career. (i.e. I can't plan on working until 60/65/etc. - I could have 3 years left, I could have 33.)
The more of a safety net I enable to exist here, the more likely it will be here when I need it, and the more connections I make here now, the more likely it is someone will catch me when I fall.
If you're JUST talking financial return (versus safety, hence my decision), it's entirely dependent on your timeline. Do you need to pull out in 1 year? 5? 20? 50? They all require different strategies.
What do you mean by "converting cash into social capital"? I can understand that you'd be prioritizing relationships, but how is cash entering this picture?
Interested to hear more about this as I also have MS and share your concerns of having a time-limited career.
It's kind of similar to building a traditional portfolio in that you want to diversify; basically the overall 'goal' is to make it so that in the future when I need help, there will be enough people around with good memories of me/who owe me favors that I will get through it.
The way cash enters into this:
- Find some very small local non-profits or charity organizations. Find out what their average donation is, and then give them double for the next X years. Bonus points if it's a non-profit or organization that does something you might need in the future. Often you'll get to know their leadership. This is by far the main one.
- I'm upper-middle class but from a working-class background, so I help people with things like legal expenses, because a lot of people get screwed but can't do anything about it. Likewise, I might kick in for a deposit somewhere if somebody's living in unsafe conditions but can't move because they can't come up with an extra ~$700. This kind of thing you only do if the person's legit, obviously.
- I buy things that I can lend to other people/make relationships over. Have a snowblower? Lend it to my neighbor. Same with tools. I try to make myself a good neighbor to have. (Not just with cash, but that's one asset I have).
- Join spaces that put you in contact with others. Co-working spaces, maker spaces, etc. Take classes, get to know people. Bonus if the classes are something that will allow you to barter in the future if you're income-limited. Convert your cash into skills you can retain and barter with in the future.
This stuff also increases your network radically, which can be helpful if you need to suddenly make a career switch, or drop down to part-time.
This is easier to do in a small town or city, for obvious reasons. Standing out in NYC or SV probably isn't as possible on a software dev salary, but it is in plenty of smaller locales.
I don't know how it's going to work, but obviously the standard advice is less applicable in our situation.
This also allows you to easily shift how many assets/how much cash on hand you have, which can be key for affording financial assistance through a relapse, since so many programs will bleed you dry first and then be shocked you continue to need help.
Not an expert by any means - but if you can buy a loan with pre-inflation interest rates, then you’ll benefit from the inflation eating up some of the debt. This makes it a good time to borrow iff
1. There is something meaningful/profitable that you can do with the borrowed money
2. Your credibility allows you to buy a loan at cheap prices
3. Your inflation predictions are accurate
4. Your loan’s terms keep the interest rate fixed at a rate less than the inflation you expect
As for myself, I don’t think I can put extra capital to profitable use right now, so I’m not going to be borrowing any money.
I would argue real estate isn't as much of a sure things as some people suggest as it could be rate sensitive and it could correlate with equity markets over the long term.
Invest in stuff — TINA, "there is no alternative." Stocks and crypto if you highly prize liquidity and are investing for the long haul (e.g. you won't take the money out again until decades from now). Real estate, not because it's crash-resistant but because it has tangible utility.
Most of all invest in your community and relationships. Those are always the best prep, whether we're talking financial or disaster preparedness.
In May 2020, Paul Tudor Jones, an investor with a long track record of success, accurately predicted our current predicament and recommended [1] the following trades as good inflation hedges:
- Gold
- The Yield Curve (long US2Y, short US10Y)
- NASDAQ 100
- Bitcoin
- US cyclicals (long)/US defensive (short)
- AUDJPY
- TIPS (Treasury Inflation-Protected Securities)
- GSCI (Goldman Sachs Commodity Index)
- JPM Emerging Market Currency Index
One caveat is that some of these bets are not easily accessible to retail traders.
Another is that TIPS are disputed as a good inflation hedge. One reason for this is that they are indexed to the CPI, which, some argue, significantly understates real inflation.
With inflation already raging, the upside on these bets might not be great if placed in March 2022. Of course, if you expect high inflation to be persistent, these may still be viable.
> Doesn’t this read like “just invest in anything”?
Not really. Even if you did everything in that list, its a tiny slice of the universe of invest-able assets. This is a quite specific, prescriptive list of things to hold as alternatives to cash in the current period of high inflation. Now, the opportunity may have been traded away in the time since this was published. Commodities, for example, have seen significant price appreciation.
Inflation has always been a risk, what's happening "now" is that the risk has been realized.
For that reason, all the best ways to deal with inflation have just shot up in price to the point where yields are unattractive.
It's like asking "where do I get a cheap umbrella now that it's raining?", it's basically too late, the trick is to account for the risk before it is realized.
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I am looking at least to 20years from now before withdrawing something.
I don't know how much will last this inflation period, how big it will go, how it will affect the stock/crypto/bond market, whatever other "it will happen only every 50 years" absurd event will happen in the next years after a pandemic and a (let's hope almost) world war 3, etc... So it makes no sense to change my investment strat now if I can't even predict the situation in 3 months.
The more utility and stability, the safer the investment. The more speculative or novel, the riskier the investment.
Real estate and property are typically pretty safe and have some utility.
As are bonds (but most might not keep up with high inflation, just dampen the effects).
Novel assets like crypto, NFTs, etc. will likely produce higher variability in returns (either positive or negative).
U.S. government TIPS or I-bonds
https://www.thebalance.com/comparing-tips-to-i-bonds-2388668
Not investing advice.
and if i plant winter wheat...
The more of a safety net I enable to exist here, the more likely it will be here when I need it, and the more connections I make here now, the more likely it is someone will catch me when I fall.
If you're JUST talking financial return (versus safety, hence my decision), it's entirely dependent on your timeline. Do you need to pull out in 1 year? 5? 20? 50? They all require different strategies.
Interested to hear more about this as I also have MS and share your concerns of having a time-limited career.
The way cash enters into this:
- Find some very small local non-profits or charity organizations. Find out what their average donation is, and then give them double for the next X years. Bonus points if it's a non-profit or organization that does something you might need in the future. Often you'll get to know their leadership. This is by far the main one.
- I'm upper-middle class but from a working-class background, so I help people with things like legal expenses, because a lot of people get screwed but can't do anything about it. Likewise, I might kick in for a deposit somewhere if somebody's living in unsafe conditions but can't move because they can't come up with an extra ~$700. This kind of thing you only do if the person's legit, obviously.
- I buy things that I can lend to other people/make relationships over. Have a snowblower? Lend it to my neighbor. Same with tools. I try to make myself a good neighbor to have. (Not just with cash, but that's one asset I have).
- Join spaces that put you in contact with others. Co-working spaces, maker spaces, etc. Take classes, get to know people. Bonus if the classes are something that will allow you to barter in the future if you're income-limited. Convert your cash into skills you can retain and barter with in the future.
This stuff also increases your network radically, which can be helpful if you need to suddenly make a career switch, or drop down to part-time.
This is easier to do in a small town or city, for obvious reasons. Standing out in NYC or SV probably isn't as possible on a software dev salary, but it is in plenty of smaller locales.
I don't know how it's going to work, but obviously the standard advice is less applicable in our situation.
This also allows you to easily shift how many assets/how much cash on hand you have, which can be key for affording financial assistance through a relapse, since so many programs will bleed you dry first and then be shocked you continue to need help.
1. There is something meaningful/profitable that you can do with the borrowed money
2. Your credibility allows you to buy a loan at cheap prices
3. Your inflation predictions are accurate
4. Your loan’s terms keep the interest rate fixed at a rate less than the inflation you expect
As for myself, I don’t think I can put extra capital to profitable use right now, so I’m not going to be borrowing any money.
I would argue real estate isn't as much of a sure things as some people suggest as it could be rate sensitive and it could correlate with equity markets over the long term.
Deleted Comment
Most of all invest in your community and relationships. Those are always the best prep, whether we're talking financial or disaster preparedness.
Another is that TIPS are disputed as a good inflation hedge. One reason for this is that they are indexed to the CPI, which, some argue, significantly understates real inflation.
With inflation already raging, the upside on these bets might not be great if placed in March 2022. Of course, if you expect high inflation to be persistent, these may still be viable.
[1] https://www.docdroid.net/H1fuimX/the-great-monetary-inflatio...
OPs q is “what” to invest in given that one can’t hold cash when inflation is rampant.
I’m just continuing to buy us equities with a tilt towards the nasdaq 100. But I have no idea how that will work out in the next 10years.
The other option is to just make as big downpayment as I can (200-400k) in the Bay Area but not really sold on living here long term.
Not really. Even if you did everything in that list, its a tiny slice of the universe of invest-able assets. This is a quite specific, prescriptive list of things to hold as alternatives to cash in the current period of high inflation. Now, the opportunity may have been traded away in the time since this was published. Commodities, for example, have seen significant price appreciation.
For that reason, all the best ways to deal with inflation have just shot up in price to the point where yields are unattractive.
It's like asking "where do I get a cheap umbrella now that it's raining?", it's basically too late, the trick is to account for the risk before it is realized.