Posts Tagged ‘inflation’

The Best Hedge Against Inflation

In broad economic terms, inflation is the devaluing of purchasing power due to an increased influx of printed currency. A hedge is an investment opportunity that can help shield a person against such economic instability. Typically, hedges are things that have a finite supply. Stocks, bonds, automobiles, machinery, equipment, and even food, would make poor hedges, because all of these items can readily be reproduced and can easily become perishable. On the other hand, an asset such as land would make the best hedge against inflation because no one can make any more of it, and it isn’t perishable.

Since the founding of our nation 235 years ago, raw land, as a dependable financial asset, has withstood the test of time. As a prime example, let’s suppose Ben Franklin, in 1776, had placed $10,000 of freshly printed currency in one safe deposit box in Philadelphia; and in another safe deposit box he place a deed for 10,000 acres that were located somewhere in the “wilderness.” Today, the $10,000 in 1776 currency would be practically worthless (inflation over 235 years would have destroyed most of its buying power), yet the 10,000 acres, depending on their exact location, would be worth millions of dollars.

Small residential rental properties (single-family homes and duplexes) can also serve as an investment hedge, but there are many potential liabilities involved. Tenants can cause serious damage; maintenance can be quite high; property taxes and insurance can eat into profits; and in a serious recession tenants can move out and the income ceases.

In summary, perhaps the very best hedge against inflation would be to simply acquire a large tract of cheaply price land in the “boondocks” and wait, wait and wait!

To view land that would serve as the best hedge against inflation, please click here.