In any context in which the devaluation of the currency applies, the possession of real estate can be a useful strategy. The idea is relatively simple: every time a currency loses value, real estate is worth more in nominal terms, because it is bought at a fixed price with a fixed interest rate. What investors should do if the U.S. UU.
Is the dollar about to fall in the foreign exchange market? Already a member? Log in What should investors do if the U. An error occurred, please try again later. Buy funds that contain gold and other precious metals.
precious metalsmaintain their value during the devaluation of the dollar and are a solid hedge against inflation.
It's better to buy gold mutual funds than to buy pure gold because there's a better market for trading with mutual funds. All that said, I believe that the best type of business to buy in a currency devaluation is a hotel. A hotel is a real, tangible, physical asset, meaning that it is not actually denominated in local currency. As with other real estate, it will tend to have an intrinsic value that is independent of currency fluctuations.
However, unlike other real estate assets, hotels have very short leases. While class A office space can be rented for a long time (up to 30 years), hotel guests tend to stay a few days or weeks at most. Therefore, a fixed-term lease attached to a building denominated in a depreciated currency can end up being a major burden, while a hotel has the ability to revalue its inventory quickly. When it comes to protecting your portfolio from a potential dollar crash, there is the option of investing in foreign bonds.
Foreign bonds can offer stability and diversification, as well as the possibility of obtaining higher returns. I have tried to write this article in a way that will be a valuable reference for future currency devaluations in other countries, or for investors who think a certain currency is overvalued, in order to determine how that will affect their portfolios. When the dollar collapses, land and agricultural products will be some of the best investments you can make. After all, if the value of the dollar plummets, the value of foreign stocks is likely to rise, as they will be quoted in stronger currencies.
One way to mitigate some of these risks is to invest in foreign bonds with shorter durations, i.e. bonds that mature sooner rather than later. It's also important to consider exchange rate risks: if the value of the U.S. dollar falls relative to other currencies, your investment will lose value (in USD).
This makes it an attractive option for people seeking to protect their wealth from inflation or a possible collapse of the U.S. dollar. In addition, political and economic conditions in other countries may affect your investment (think Brexit). There are a number of factors to consider when investing in foreign bonds, including inflation rates, interest rates, and political risk.
While gold, land and several commodities propose a physical form of investment, you can diversify your assets by investing in Bitcoin and other cryptocurrencies. . Those who have read my writing before will know that I would never write a macro article without at least some investment ideas to buy. Bitcoin is often called “digital gold” because, like gold, it is scarce (there will only be 21 million bitcoins), durable (it cannot be destroyed or corrupted) and portable (you can carry millions of dollars worth of bitcoins in your pocket).
However, both Bitcoin and Ethereum offer investors protection against inflation and the possibility of making big profits if they continue to increase in popularity and value. A major economic collapse could require more than investing in precious metals and foreign currencies. Another strategy is to scale your investments, which means investing in a series of bonds with different maturity dates, so that you don't invest all your money at once. Of course, no investment is risk-free, but diversifying into foreign bonds can help protect against the potentially devastating effects of the dollar's fall.