Fearing inflation, wealthy stock up on hard assets

Some economists think that the economy will grow and others expect a relapse. The first option can cause inflation and the second can cause deflation. It doesn’t matter which direction the economy follows, in both cases investors can protect their money.

On the one hand, the gold indicator seemed attractive, with a grow of 21%. Traditionally, tangible assets such as gold hold their value, even when the price level is increasing and the purchasing power of the dollar falls. So, asset managers are advising wealthy people to keep an important part of tangible assets as inflation-fighting tool in their portfolio.

On the other hand, contracted credit, stagnant wages and given overcapacity are signals that the risk of deflation (a decrease in the general price level of goods and services) is more likely. Last week, the statements of the Federal Reserve (the central bank of the United States) and J.P. Morgan were feeding this view.
“GenSpring Family Offices” advise their clients to gamble on two horses, it recommends taking both, long and short positions in commodities, in their portfolio. In case of inflation, they suggest investors have to change their illiquid part to more tangible assets.

There are also other trends visible in the world of asset management. Wealthy clients are showing more and more interest in direct investments, like in farmland, timberland, mines and naturally real estate. But these sorts of investments should be limited to 30% of the portfolio.

I agree with the fact that you have to protect your wealth. Investments like gold and real estate remain attractive for the richer people. Maybe we also have to follow the advice of asset managers, because they are well informed. At my opinion direct investments in mines and timberland are risk full when you aren’t familiar with this business. When you are considering to invest in such a direct investment, you have two options. First of all, you can ask professional advice. Or you can buy shares of this sort of funds.

http://www.investmentnews.com/article/20100502/REG/305029988

Benny De Meyer, 2FV4