I remember when gas was 99 cents a gallon. The year was 1999, I was 18 years old, and I was in Pensacola, Florida. Man, those were the good ol’ days. Whatever happened to those gas prices? Inflation happened to them.
That’s right; inflation can slowly eat into our stockpile of money if we don’t account for it. As a Bonafide Investor, we will need to take inflation into account for everything that we do. If we do not, we are doomed to lose much of our spending power over the years.
In part one of this series, I talked about being an investing insider or outsider. For most of us, we are outsiders when it comes to the stock market and crypto markets. So why do we still invest in these markets? I use them as inflation hedges.
5 Takeaways from “The Options Playbook”
You see, I am not trying to get the highest returns possible. For the stock market, I am aiming for an 8% annualized return. I like to split that up between 4% capital gains and 4% dividend yield. I can use the same split for cryptocurrencies between capital gains and interest.
In regular times, inflation is roughly 2-3% annualized. So, with my stock market philosophy, I can beat inflation and have a little money to spare. I like to keep my dividend yield so high because they can beat inflation by themselves.
If this all seems above your head, that is okay. To form the mindset of an investor, you must hear someone talk like an investor. As we raise our children, we stop chatting in baby talk and start speaking to them as adults. Investors always think about inflation.
Earlier, I said that inflation is 2-3% during regular times, but what if it is higher than that? In part two, I noted that inflation is coming, and I meant it. We do not know how bad inflation is going to be this time around.
So we need to prepare for the worst when it comes to inflation. Inflation hit an all-time high in the 1970s, with interest rates hitting 20%. Now, we may not be getting inflation this bad, but it could get to 4-5% annualized. So how do we prepare?
Stocks vs. Cryptos
We can prepare two ways, on the stock market and off the stock market. I am a total investor and tend to see the world as a complete picture. When people tell me that they made a 15% return on the stock market, I say, “great.” I am renting rooms for an infinite return every month. No amount of money can capture the concept of printing money. I am also printing money as I am writing articles and publishing books.
Do not get caught up comparing yourself to single-minded investors, whether they are real estate, crypto, stock market, or business. I would much rather be well-diversified into all of them than be an all-star in one. Here is a sneak peek at a day in my life.
The best way to get rich and beat inflation is to have money coming in from all angles—every single day. This is one day, June 1st, 2021, where I collected all types of cash. I earned money from my Discover high yield savings account, dividends, rental income, crypto interest, and royalties from books.
Don’t Let School Interfere with Your Education
If you can do this every day, you will surpass inflation and become rich on the way. But let’s focus on how we can attempt to beat inflation on the stock market.
On the Stock Market. Certain securities perform better in inflationary and times of high interest rates on the stock market. Commodities and banks are two types of investments that usually perform better through these times. I will have an article on commodities coming up soon.
Commodities are physical products used for consumption and production. They include things like pork, wheat, oil, etc. Getting into the commodities market can be extremely difficult because there is a steep learning curve. I know because I read a book called “A Trader First Book on Commodities.”
Just because it is hard to trade commodities doesn’t mean that we can’t invest in them. We can invest in individual companies that supply commodities. Their stocks may also perform well in the stock market.
Dividends vs. Royalties part II
I actively invest in a Real Estate Investment Trust named Gladstone Land Corp (LAND). They own farmlands that produce commodities. The REIT is doing very well and has become expensive. It is important to note that I am a buy-and-hold investor. I dollar costs average into my positions and hold them. I am not trying to turn a profit on my investment during different cycles.
Now, that doesn’t mean I don’t purchase investments at opportune times, but the intent is to hold them.
Compounding: The 8th Wonder of the World
Banks also do well in times of high-interest rates because they can pass these rates onto consumers via bank loans, mortgage loans, and credit cards. Remember, the federal reserve may raise interest rates to slow or control inflation.
I love investing in banks, especially when interest rates were cut last year. Now they are recovering nicely, and I am positioned well going into inflationary times. I invest in Ally Bank (ALLY) and Wells Fargo (WFC). Their dividend yields are pretty low, but I am investing for the long term.
Off the Stock Market. I believe the best thing to do for inflation is to keep making money outside of the stock market. The more diversified you are, the less likely you are to be a victim of market forces. As I displayed in the picture above, you will need money coming in from all angles and avenues.
Boring Investing is Good Investing
Remember the five asset classes of passive income retirement income, investment income, business income, rental income, and cryptocurrency income. Write down these five pillars each and every month and tally how much you make in each.
You will be stronger in some as you compare to others. Work on the ones that you need to increase. I did not have any business income starting at the beginning of this year, but I achieved $40 in royalties last month through hard work. Every income stream has to start somewhere, and it usually isn’t high. The idea is to keep at it until your income drip turns into a stream and eventually a waterfall.
I wrote more about this topic in “Diversify Your Passive Income” and the book format. I’ll leave a picture of the book cover because I think it is incredible!
Inflation is coming, and as a Bonafide Investor, it is your job to account for this money-hungry monster. On the stock market, you must ensure you are purchasing securities that hedge against inflation. Off the stock market, diversify your passive income, and keep building wealth generators.
If you can do these two things, you will be well prepared to defeat inflation and succeed as others struggle. Good Luck!
Read My Books for Free: Free Kindle Books Schedule also on Kindle Unlimited Join me on the best app for Crypto- Voyager
Follow us on our Facebook Page (here)
Join our Facebook group (here)
20 Books that Will Make You Rich (here) part 2 (here)
Follow our goal to Retire on CryptoCurrencies (here)
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Leave a Reply