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How to Profit from Inflation: REITs, Gold, Silver, Stocks, Crypto and More! - YouTube
Channel: The Newbie Investor
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are you worried about a spike in inflation and聽
looking for ways to preserve your money and聽聽
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reduce your risk look no further in this video i聽
will give you some stock and asset picks that you聽聽
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can buy to hedge against inflation i'll be using聽
the assets available on the etoro platform as an聽聽
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example but the same strategy can be applied when聽
trading on any other broker if you're interested聽聽
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in videos like these make sure you subscribe聽
down below but without further ado let's get
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started first off on the list we have real assets聽
they are one of the obvious picks to hedge against聽聽
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inflation why because inflation is essentially聽
the devaluation of currency meaning you need聽聽
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more money to buy the same amount of goods or聽
services the most well-known example is gold and聽聽
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other precious metals like platinum and silver聽
however other real assets include copper oil聽聽
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even lumber soybeans and cattle these are known聽
as commodities so what are your options here you聽聽
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can obviously go and buy a cow for a couple of聽
gold bars but as investors we have better choices聽聽
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there are two main ways to buy commodities聽
on etoro one is to buy commodity futures cfds聽聽
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personally i avoid them as their high聽
minimum capital requirements if you don't聽聽
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leverage and fees if you do leverage however聽
it is up to you although i would say that if聽聽
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you do decide to buy the cfd futures make sure聽
you learn about them and how they work because聽聽
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a lot of money can be made and a lot of money can聽
be lost there typically they are a good choice聽聽
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for shorter trades for example if you're planning聽
to only hold them for a week or two so that's one聽聽
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advantage the second way to buy commodities and my聽
personal favorite is through etfs meaning exchange聽聽
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traded funds with them you cannot leverage so聽
that's drawback if you prefer leveraging but if聽聽
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you don't then they are a perfect choice generally聽
etfs are better for investing over the longer term聽聽
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some commodity etfs that you can trade include聽
the spider gold shares and gold minishares etfs聽聽
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these funds track the price of gold the聽
sprott physical gold trust is another gold etf聽聽
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but it actually holds gold whereas the previous聽
two only trading futures obviously owning the聽聽
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real thing is better but that comes at a higher聽
expense ratio almost two and a half times the聽聽
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expense ratio of the gold mini shares so there are聽
trade-offs other etf that you can trade on etoro聽聽
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and most other brokers are the ishares silver聽
trust etf the sprott physical silver trust and the聽聽
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aberdeen platinum fund when it comes to commodity聽
etfs it is really important to check exactly what聽聽
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they do do they own the commodities or do they聽
simply track the price also check the size of聽聽
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the fund in terms of assets under management and聽
the fees and any other expenses that they have聽聽
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unfortunately etoro does not have a broad聽
selection of commodity etfs and for example聽聽
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it does not have an etf that tracks the price聽
of copper but it does have most of the biggest聽聽
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and most established ones other important etfs to聽
check on etoro include the invesco db agriculture聽聽
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trust which tracks the futures of agricultural聽
commodities the united states oil fund the invesco聽聽
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db oil fund or the tuquam corn fund my personal聽
choice for commodities as an inflation hedge right聽聽
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now is gold via the spider gold minishares atf聽
platinum via the aberdeen platinum fund and silver聽聽
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via eyeshare silver trust i think they have a聽
very decent potential of growing in the next 3-12聽聽
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months and even after that platinum especially聽
is at a very very low price relative to the other聽聽
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precious metals so it's my main pick but gold聽
and silver are also trading at very good prices聽聽
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in terms of allocation percentage five percent is聽
okay ten percent is probably better twenty percent聽聽
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is probably overdoing it if you're using them as聽
a hedge if you simply want to buy the commodities聽聽
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because that's your thing or because you think聽
that they'll go up then go for it then the other聽聽
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type of real asset that we can trade on etoro聽
is real estate i mean it's literally in the name聽聽
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real estate obviously you cannot buy a house on聽
etoro but you can buy companies that buy houses聽聽
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and by that i mean rates and that stands for real聽
estate investment trusts what rates do is they聽聽
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buy and lease out real estate and then they pay 90聽
or more of their earnings as dividends to qualify聽聽
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for the raid status this can be any type of real聽
estate it could be houses it could be apartment聽聽
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blocks it could be shopping malls hospitals聽
even the real estate that cell towers are put on聽聽
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literally any type of real estate any patch of聽
land the cool thing about some raids is that聽聽
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they pay out monthly dividends so they are also聽
perfect for income portfolio one of the best rates聽聽
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out there is agnc another is realty income simon聽
property group and so on some metrics to keep in聽聽
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mind with rates are the historical dividend yield聽
and equity appreciation it's ffo meaning funds聽聽
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from operations metric and strong management聽
other metrics like debt to equity ratio and聽聽
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effective interest rates are important but make聽
sure you are comparing them to similar rates聽聽
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as these tend to vary a lot based on the segment聽
that the rate is operating in if you don't want聽聽
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to risk picking rates yourself you can simply buy聽
a rate etf like the ishares uk property etf which聽聽
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invests in uk rates or the vanguard real estate聽
index fund or the ishares core us rate etf some聽聽
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focus on a single country like the ones i just聽
mentioned but others like the ishares global rate聽聽
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etf invest in real estate around the world again聽
if you're looking at a rate etf check the dividend聽聽
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percentage the expense ratio and which countries聽
the etf covers the second type of asset that you聽聽
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can buy for inflation is stocks actually stocks聽
as a whole tend to be positively correlated with聽聽
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inflation meaning that they go up when inflation聽
goes up although not as much as real assets like聽聽
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commodities and real estate specifically i have聽
two types of stocks in mind and i also have some聽聽
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that are best avoided the first is the commodity聽
producers the miners the lumber companies the聽聽
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manufacturers they tend to get a boost in sales聽
when commodity prices go up and therefore they聽聽
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trade higher whenever inflation goes up on etoro聽
that includes companies like southern copper聽聽
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freeport mcmorron and pan-american silver all of聽
which are miners then we have louisiana pacific聽聽
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who produce wooden building materials their hauser聽
is actually a raid but they're also one of the聽聽
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world's largest private owners of timberland and聽
if you haven't seen lumber prices recently well聽聽
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check them out they've gone up 400 in the聽
last year there's a lot more stocks that聽聽
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you can buy but these five are some that i'm聽
personally considering as an inflation hedge聽聽
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and i think that they have a good bullish聽
case especially for southern copper as copper聽聽
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is becoming increasingly important because of the聽
rise in renewable energy the second type of stocks聽聽
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are growth stocks and here you may be wondering聽
why why growth stocks they got destroyed in last聽聽
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several months precisely because of inflation well聽
that is true but only to an extent growth stocks聽聽
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which were overvalued or had a lot of their future聽
earnings priced in got hammered hard growth stocks聽聽
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which are already earning a decent amount did not聽
they actually did well think of them as a mix of聽聽
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value and growth they've got good fundamentals聽
but they've also got decent growth prospects聽聽
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growth is especially important during times of聽
high inflation because if the company's earnings聽聽
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growth is lower than the inflation rate then the聽
company's earnings are essentially getting smaller聽聽
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every year they are not increasing so if you have聽
a company with two percent earnings increase while聽聽
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inflation is at three percent well that's just bad聽
news for the company another metric to look at is聽聽
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the real earnings yield which is the difference聽
between the earnings yield essentially the inverse聽聽
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of the p e ratio and inflation so if you have a聽
p e ratio of 20 you will have an earnings cos of聽聽
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5 and if you subtract the inflation from there聽
for example the four point two percent we got聽聽
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on april for the us you get zero point eight聽
percent or the real earnings yield obviously聽聽
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positive earnings yield is good negative earnings聽
yield is bad right you don't want to buy company聽聽
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that is expected to lose money nobody wants聽
to some of my picks that match those criteria聽聽
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include facebook google apple dropbox corsair聽
microsoft and so on there are obvious picks聽聽
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and yet they are overlooked facebook and google聽
especially their monster companies absolute beasts聽聽
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cannot recommend them enough and are some of聽
the best companies to buy right now on etoro and聽聽
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obviously on other brokers now some stocks that聽
tend to underperform during inflation are stocks聽聽
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that have negative real earnings yield like i聽
mentioned before and also stocks that pay high聽聽
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dividends and that doesn't include raids because聽
they're a bit different there are some mixed聽聽
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opinions on banks during a period of inflation聽
some say the banks do well with low inflation聽聽
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but most people tend to agree that banks do not聽
outperform in those periods however there seems聽聽
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to be no strong correlation between bank stocks聽
and inflation so i'll let you decide for yourself聽聽
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on that one also i want to say that inflation聽
is sometimes restricted to a specific country聽聽
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so we saw the 4.2 percent inflation figures from聽
april in the us but does this apply to the rest of聽聽
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the world here in the uk inflation was only 1.6聽
in april and in china it was only 0.9 percent聽聽
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so we can see that the situation is obviously聽
different unfortunately different countries聽聽
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have different inflation measures so it's not聽
always a good idea to compare these like for like聽聽
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but it is the best tool that we have on our hands聽
and in this case we can simply start buying stocks聽聽
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abroad there are plenty of chinese stocks on etoro聽
and some of my personal favorites include alibaba聽聽
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360 finance and baidu i think these are good picks聽
for inflation as they are currently profitable聽聽
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and are expected to continue growing at a decent聽
rate if you're not that sure about any particular聽聽
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chinese stock you can get the invesco china聽
technology etf or the ishares china large cap etf聽聽
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china is a good country to pick in my opinion as聽
it is one of the fastest growing markets right now聽聽
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but at the same time it is literally the largest聽
economy in the world there are some political聽聽
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risks involved which is why it may be smarter聽
to pick a diversified chinese etf as opposed聽聽
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to picking single stocks if china is not your聽
country of choice though you have the ishares msci聽聽
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india etf the vanguard developed markets etf or聽
the vanguard emerging markets etf i don't have聽聽
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that many favorites in the european stocks as the聽
markets seem to be growing at a much slower rate聽聽
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than the us or china but a good way to invest in聽
european stocks is through the vanguard foods in聽聽
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europe etf these are good not only for inflation聽
but for general portfolio diversification as well聽聽
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and you can find them on etoro the wenger ttfs聽
are always a good choice as they tend to have the聽聽
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lowest etf expense ratios the other main asset聽
class bonds is usually not a good choice for聽聽
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inflation fixed income in general underperforms聽
during inflation which is also why dividend stocks聽聽
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tend to take hit there are two main reasons聽
behind that the first one is the problem of聽聽
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the bond's real return which you get by taking the聽
bonds coupon and subtracting the inflation from it聽聽
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the current u.s 10-year bonds have a coupon rate聽
of 1.625 percent which is problematic as inflation聽聽
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is currently at 4.2 percent so the bond has a聽
negative real return of 2.575 you may get the bond聽聽
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a bit cheaper or more expensive but it would have聽
a relatively small effect on the percentage return聽聽
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the second reason is that central banks typically聽
raise interest rates during inflation and that in聽聽
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turn devalues existing bonds as investors will聽
essentially be able to buy new bonds with higher聽聽
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coupon rates bonds are simply not the best choice聽
right now and people like warren buffett ray dalio聽聽
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even jp morgan's jaime diamond have expressed聽
really strong opinions against owning bonds right聽聽
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now they literally said that only idiots would buy聽
bonds right now that's a direct quote i'm not even聽聽
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making this up so you can tell that bonds are聽
probably not the asset to be buying right now聽聽
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there are inflation protected bonds which聽
you can get through the ishares tips bond etf聽聽
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but in my opinion they offer an聽
extremely low return for what they are聽聽
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obviously it's up to you and your own investment聽
strategy but i think that you can get far better聽聽
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returns in the stock market in an index fund or聽
through a commodity bonds are just not worth it聽聽
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finally we need to mention cryptocurrencies they聽
are said to be the new inflation hatch and bitcoin聽聽
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is hailed as the new digital gold now they are聽
obviously risky and we've seen that over the last聽聽
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few weeks but they do offer a good return so if聽
you can stomach the volatility you should be fine聽聽
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personally i just owned bitcoin but you can also聽
take a look at the crypto equal portfolio on etoro聽聽
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or the crypto portfolio which has the same 16聽
cryptos but with a different allocation percentage聽聽
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or just cryptocurrency which tracks the two聽
biggest cryptos meaning bitcoin and ethereum聽聽
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the only downside to these portfolios is that聽
they require a minimum investment of one thousand聽聽
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dollars if you don't want to do that you can just聽
pick cryptos yourself although that is risky if聽聽
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you don't know what you're doing plus etoro does聽
not have such an extensive offering of cryptos聽聽
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although they do have about 20 or 25. the other聽
downside of etoro is that it tends to have a large聽聽
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spread when it comes to cryptos so bear that in聽
mind exchanges like binance then you have much聽聽
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lower fees so it may be worth checking them out聽
instead however etoro does allow you to copy other聽聽
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traders so you can just find someone who mainly聽
trades cryptocurrency and basically outsource all聽聽
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your cryptocurrency trading to them i've got about聽
three to four percent of my portfolio in bitcoin聽聽
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which is a decent amount personally i don't think聽
people should put more than five or ten percent聽聽
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of their friends in crypto unless they really聽
know what they're doing and they're following聽聽
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all the daily movements of crypto we've seen聽
some horrendous horrendous drops in crypto like聽聽
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last week for example so it's only a good聽
choice for people with large risk appetite聽聽
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and if you do want to invest more in crypto i聽
recommend learning more about it first you can聽聽
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check out my playlist on crypto for beginners聽
or if that's not your thing check out some of聽聽
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my top stock picks for 2021 if you know other聽
people that will benefit from this video make聽聽
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sure you share this video with them thank you聽
for watching and i'll see you in the next video
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