6 Simple Rules

Wise Investors
Follow To Shield
Their Wealth
From Inflation
By Propchain
6 Simple Rules Wise Investors
Follow To Shield Their Wealth From
Inflation
What a shame it is to save up your money, only to have it be eaten up by inflation.

The current market conditions have harmed us all in one way or another, be it
through increasing gas prices and rent, or daily expenses being more and more un-
affordable, inflation post-pandemic is rampant and real. What is worse than higher
costs is inflation making you less wealthy every day by eating away at the value of
your hard-earned savings, and while there are many investing methods accessible in
today’s interconnected world, it can be hard to know where and how to start.

Let’s check out a few ways to protect your savings and make inflation work in your
favor through investing and economizing.
Investing can be both exciting and scary, but in all cases, it is a necessary activity
to take part in be it passively or actively for everyone, as wealth preservation is
essential for both survival and thriving as an individual, family, and community. For
this exact mission, we attempt to provide you with some general but extremely useful
pointers for investing that are often forgotten in inflationary times, especially when
emotions are high and fear takes hold of market sentiments and investor behaviors.

Let’s dive straight into 6 Ways to Protect Your Savings From Inflation without any
further ado.

1. Minimize Cash Holdings

This could sound ironic, but the more cash you have in an inflationary economy, the
poorer you become by the day. Before you consider any investment options or ways
to protect your savings, keep in mind that the less cash you hold, the better.

A. Cash Loses Value Everyday

Inflation in its simplest sense is the consistent increase in prices of goods and
services, while levels of income remain relatively stable. This causes disruption to
the average consumer, which you may or may not be, due to your income staying
the same in the face of consistently increasing prices. What is called a diminishing
Purchasing Power of cash is the first inflationary bullet you must avoid, as the longer
you hold stale, inactive cash, the fewer products, and services you are able to buy
the next day.

An easy way to measure this yourself is to see how much you used to pay for a full-
tank of gas last year compared to this year, and see if your income has increased
proportionally to the price increase of gas or not. Most likely, this is not the case. That
means that the money you had can now buy you less things than it could have a year
before, and the same is happening to any idle cash you have laying around.

So, make sure you invest any cash you have in excess, as otherwise, you would be
seeing it lose its value everyday, along with the hours you spent and effort you put in
to earn it.

B. Gas Prices and Diminishing Purchasing Power

A simple example of this is gas prices, assuming they increase by 1% each day, by
the end of a full month these gas prices would have gone up by 30% (0.01 x 30-
days), all while your income has not gone up or down whatsoever. Ultimately, you
need to find ways to eliminate cash as much as possible and invest it in wealth-
preserving assets such as real estate or fine art.
2. Avoid Investing in Liabilities

The last thing you want for yourself is to invest in liabilities, assets, or products that
cost you money instead of preserving or increasing your wealth. The main form of
liabilities you may be taking up is credit card debt or bank loans. During inflationary
periods, you need to be mindful of where your money is going and what it is being
used for, hence the emphasis on wealth preservation and growth.

Our method to do this is to map out everything that costs you money from bills to
subscriptions, loans and contracts, and see which ones you actually need to keep,
and which ones can be canceled or discarded. That subscription you only use once
a year? Out the window. After avoiding as many liabilities as you can, be it by opting
out of a new liability or canceling an old one, you are sure to have more money to
save up and invest, all leading you to grow your capital against rising inflation rates.

3. Avoid Depreciating Assets

Now, after avoiding assets and consumables that visibly and directly cut your cash
short, you must also think critically before investing in specific assets, namely
depreciating assets. Depreciating assets are assets that lose value over time,
instead of preserving their value or increasing in value, and examples of this include
certain items of clothing, cars, and types of technology equipment like laptops and
tablets.

These assets lose value over time for different reasons, but regardless of those, you
must avoid investing in depreciable assets during inflationary economies unless
there is a necessity for them.

For example, if your current car works just fine, is in good condition, and does not
cost you much in maintenance, maybe buying a second car is not the best idea.
Otherwise, getting a new monitor or fancy laptop while prices are increasing on
a daily may give you instant gratification, but long-term regret when it eventually
crashes and becomes obsolete within less than a decade.

The key takeaway of this inflation avoidance strategy is that you should only invest
in depreciating assets only if there is a true need for them, such as needing to
commute for long hours and not owning a car, or working from home but not owning
a laptop or computer. If a need is not there, you are better off saving up that money
and investing it in assets that increase or at least preserve your wealth.

4. Invest in Real Estate

When looking to invest in an asset that appreciates in value over time, provides you
with passive income, and carries true utility to you or a tenant, Real Estate is where
the wisest investors look first. In fact, property owners benefit most in inflationary
economies for the simple fact that most rental contracts include rent increase
clauses that account for both a value increase and inflation rates.

For example, a landlord may raise the rent by 3% each year, accounting for a
standard 1% value increase, and 2% inflation. Such approaches are rarely found or
perhaps impossible in other investments, as, after all, homes are and will always be
in demand, unlike many other investment options.

That said, we understand that investing in Real Estate can be costly, or perhaps
require a mortgage loan, which would be completely counterintuitive to what we
stated in 2. Avoid Investing in Liabilities. So, we’ve created the solution for you:
Propchain’s ecosystem. When you use Propchain, you get to invest in an array of
global properties for a fraction of their value as a result of fractionalization.
5. Diversify Across Markets

The old adage goes, “don’t put all your eggs in one basket”. This stands for investing
in inflationary economies as well. When faced with the rampant effects of inflation,
you can never be sure which assets you own will lose value tomorrow (unless it’s
cash, then you KNOW it’s losing weight tomorrow). To avoid any large losses to your
investment portfolio, make sure you diversify, diversify, diversify.

Diversifying here does not only concern the act of buying stocks across different
industries, but also across different markets. The wise investor has his money in
stocks, crypto, and most essentially Real Estate, so you should do no different!
By diversifying your investments, you are ensuring to the best of your knowledge that
one investment will not damage your savings and wealth overnight, because your
capital is spread over different commodities, stocks, or coins.

Luckily, with Propchain you can buy a property with both crypto and fiat currencies,
meaning if you feel a crash coming on the cryptocurrency market, you can quickly
shift your tokens into the real estate market. Read more about how you can achieve
high-performing diversification and portfolio monitoring through Propchain’s Deck.

6. Consider Commodities

No, they are not out of fashion. It would be a mistake to assume that with the rise of
decentralized finance and online stock exchanges commodities are now becoming
less valuable or not in demand. Gold in specific is universally recognized as an ant-
inflation asset, which appreciates over time regardless of economic conditions, as
opposed to fiat currencies, which lose value every day in any economy, but even
more in inflationary ones.

For that reason, when diversifying your portfolio, you should not only consider
cryptocurrencies, real estate, and stock options, but be mindful of the powerful
potential of commodities such as gold, silver, and crude oil barrels.

Final Takeaway

Inflation is not anyone’s friend. It shifts your focus from thriving to merely surviving
and eats away at your savings if you are not careful. For that reason, we hope that
this simple guide was able to provide you with basic pointers on how you can protect
your savings against inflation and make it work in your interest as opposed to your
and your wealth’s detriment.

GENERAL DISCLAIMER

None of the information provided in this document serves as is, nor should be considered or used as general nor
personal financial advice, but mere educational content regarding investing which has its merits and shortcomings, as all
investments carry risk.