Investment 6 Assets That Are Better & Safer Than Cash

One of the biggest reasons why money is considered valuable is because it is used to store value for the future. However, governments today print more and more money to finance their deficits. Therefore, you never know when that piece of paper you call the dollar will become worthless. This is why financial gurus recommend investing in something valuable that is scarce and can’t easily be created. This is the biggest reason why the rich have a portion of their portfolio always reserved for precious metals. Precious metals such as gold, silver, and more will always rise in value when inflation rips through the ceiling before the 1950s.

An ounce of gold could be bought for $400 in 2023. The same ounce is priced above $2,000, and according to Prime Xtz gold forecasts, this is supposed to go up to $10,000 by 2032. That is, in about ten years your gold investments will be five times what they are now. So while cash keeps going down, gold keeps going up. Similarly, other precious metals are also better than holding cash in the bank. If you are wondering how to gain gold exposure to your portfolio without buying physical gold, you can invest in gold ETFs. Gold ETFs are highly affordable investment vehicles, which give you returns based on gold price movements without your having to hold physical gold.

1. Industrial Commodities: Raw Materials

While scarcity is one reason why precious metals are so called precious, these have natural utility value also, and this makes them indispensable industrial commodities. For example, silver is used in the production of electronics, medical equipment, nuclear reactors, and whatnot.

Similarly, other metals such as cobalt, nickel, and copper have high industrial demand due to their natural properties that can’t be easily replicated by alternative materials. To draw a much clearer picture, since 2020, the demand for cobalt has skyrocketed. The biggest reason is its crucial use in producing batteries for electric vehicles. Commensurately, its prices have risen from US dollars 20,000 per ton in 2012 to US dollars 40,000 in 2022.

That’s a 100% increase in just ten years. Therefore, having exposure to such raw materials can significantly boost your portfolio in high demand phases. However, not everyone can invest a huge amount of money in acquiring raw materials, nor can we physically store them or find the right buyers. Therefore, investing in stocks of mining companies such as Rio Tinto, mining-focused mutual funds, or even derivatives such as futures and options are all great ways of gaining such exposure.

2. Safe Haven Currencies: The Swiss Franc and More

In the current world of fiat currencies, where no currency is backed by gold, geopolitical stability is a crucial factor while investing your money. This is why the rich always keep their money in Swiss banks. Switzerland, having one of the world’s strongest economic systems, offers a much more stable geopolitical environment. Therefore, the Swiss franc is considered a safe haven asset in times of turmoil and instability.

We have seen this time and again, for example, during the eurozone debt crisis in 2009 and in the global financial crisis in 2008, sizable funds flew from these countries to Switzerland to prevent wealth erosion due to currency depreciation. Also, the Swiss franc acts as a valuable alternative to the US dollar for international trade. For example, during the recent Russia-Ukraine crisis when the US imposed sanctions on Russian energy trades, Russia executed trades in Swiss franc. 

Such events soared the demand for the Swiss franc, leading to its tremendous appreciation against all other currencies. In early 2023, 1 CHF fetched 1.1074 USD, making Swiss franc holders multiply their wealth overnight. Therefore, superior currencies such as the Swiss franc, British pound, and Chinese yuan are a great store of value. But as not all of us can open Swiss bank accounts, currency ETFs and forex brokers such as Forex.com help smaller investors gain currency exposure with as little as $100 for sovereign guarantee.

3. Sovereign Guarantees: Government Securities

Have you ever looked at the dollar very closely? It has the words “this note is legal tender for all debts, public and private.” Ever wondered what it means? Since 1971, when President Nixon abolished the gold standard, the dollar became the legal tender by US law. This made it valuable as a means of exchange, and we started considering it a commensurate repayment for any good or service. Although no fiat currency in the world is backed by gold or any other physical asset, they are still considered to be backed by the full faith and credit of the government.

In plain terms, your money is as stable as the government that backs it. This is why investing in sovereign guarantee is a valuable store of value. The government of any nation is always the last to default. If the government defaults, the whole nation will default, and no strong government will let that happen. Therefore, one of the safest ways of investing in sovereign guarantee is through government securities or g-secs. However, only stable government g-secs with investment grade credit ratings are advisable.

Remember the 2009 sovereign debt crisis in Greece? IMF, Eurogroup, and ECB had to bail the country out of its debt multiple times. Therefore, a government’s global strength should always be considered while investing in g-secs. In the US, you can invest in treasury bills, notes, and bonds to gain sovereign guarantee exposures. These offer better returns than keeping money in the bank. Also, they are backed by the US government’s strength in the global economy. Small investors can buy Treasury securities directly from the government through the Treasury Direct portal or from the secondary market.

4. Value Stocks and Mutual Funds

Treasury investments definitely provide a better return than cash; however, because of low risk, they offer lower returns than stocks. And while low risk is a crucial investment criterion for risk-averse investors, higher returns are sought by almost all investors and stocks are a great way of achieving that. Also, not every stock is equally risky.

The stock market is broadly divided into two types of stocks: value stocks and growth stocks. Growth stocks, such as technology stocks, are riskier because they deal in ideas and technologies that have a high failure potential. However, value stocks such as Nucor, which deals in industrial metals, are less risky due to established demand for the foreseeable future. Therefore, value stocks with strong fundamentals not only provide steady and stable price appreciation but also provide stable dividends.

However, researching the fundamentals of every value stock can become very time-consuming for average investors. Therefore, dividend-focused mutual funds such as the Vanguard High Dividend Yield Index Fund Admiral shares, with a stable dividend-paying history, are ideal and affordable investment vehicles for retail investors.

5. Land and Real Estate: A Time-Tested Inflation Hedge

Accountants consider land as a non-depreciable asset for a very valid reason. It is scarce and always in demand. Since the beginning of time, land has been one of the most valuable resources in the world. We need land for homes, schools, factories, agriculture, and commercial spaces among others. And with a growing population, its demand will never fall.

Similarly, residential homes, office spaces, and commercial properties built on the land are also always in demand. Therefore, both land and real estate act as excellent inflation hedges in your investment portfolio. According to a Bloomberg study, housing prices have tripled between 1992 and 2020, despite a huge dip during the 2008 housing bubble.

Therefore, having real estate exposure always comes in handy when the dollar starts losing value. However, most small investors only think of getting into real estate much later in their lives because they only think of real estate in terms of the house they live in. While owning a fully paid-up home is a net worth goal for when you are in your 40s, having a slice of the retail property market is recommended at every age.

Also, against the most common belief, you don’t need to have a lot of money to gain real estate exposure. You can invest in REITs or real estate investment trusts, which are similar to mutual funds but for real estate. One of the most popular REITs in the US is Ventas Inc. (VTR), which invests in healthcare real estate, including senior housing, research facilities, and hospitals, among others.

Alternatively, you can borrow to own rental properties. Your rent will take care of the expenses and mortgage payments and also bring you some profits.

6. Collectibles: Vintage Cars, Rare Art, and More

Collectibles like vintage cars, rare art pieces, handcrafted luxury handbags, limited edition watches, and even the first editions of iconic books fall into this asset class. In the case of a regular car, the price depreciates by half the moment you put it on the road. However, the math works in reverse for vintage cars like wine; they get more valuable with time.

In fact, according to Autocar, a 1955 Mercedes-Benz 300 SLR coupe was sold in 2022 for an eye-watering €135 million. Only two such cars have ever been produced, and therefore they are considered rare collectibles by car connoisseurs. Similarly, in 2017, Leonardo da Vinci’s most controversial painting, Salvator Mundi, was bought for a massive $450 million at a Christie’s auction by a Saudi prince.

The reason why the rich spend significantly high amounts of money on limited edition products is that these unique pieces are timeless repositories of value. They can fetch an unimaginably high price if you find the right buyer. However, for average investors, investing in collectibles can feel like a distant dream. 

Therefore, online marketplaces such as Whatnot are fantastic options for selling rare baseball cards, comic books, action figures, and much more. And if you can’t buy the whole thing, you can even invest in partial ownership of collectibles on platforms such as Rally and Masterworks.

Conclusion

In summary, there are several alternative assets that can help you protect your wealth and hedge against inflation. From precious metals and industrial commodities to safe haven currencies, government securities, value stocks, real estate, and collectibles, there are plenty of options available for every type of investor.

While traditional investments like stocks and bonds are essential components of a diversified portfolio, adding alternative assets can provide an extra layer of protection and potentially higher returns. Always remember to do thorough research or consult with a financial advisor before making any investment decisions to ensure they align with your financial goals and risk tolerance.

Diversifying your investment portfolio with these alternative assets can help you create intergenerational wealth and protect your hard-earned money from the erosive effects of inflation.