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5 Must-Have Investments When Inflation is High (Under 15 Minutes!) - YouTube
Channel: Toby Mathis Esq. | Tax & Asset Protection
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- Hey guys, Toby Mathis is here.
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And today we're going
to talk about five tips
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for investing when inflation is high.
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You can't avoid the fact
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that there are a lot of
people chasing around
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fewer goods right now.
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We have supply chain issues.
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We had this massive dump
of cash during the pandemic
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and people's savings accounts
have never been higher.
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So you have people that
are flush with cash
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and fewer items to purchase
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which is doing what to those items.
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That's the definition of inflation.
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It's driving them up 7.5%,
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if you listen to the government.
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But we all know for stuff
that we're actually buying
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it's much, much higher.
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In fact, in many metropolitan areas
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just rents alone are in
the 15% range, 20% range.
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Prices of houses last year
nationally went up 20%.
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It's crazy.
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So here's the five areas that you go into.
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Number one, I just mentioned real estate.
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I just mentioned how the
rents have been going up
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and prices have been going up.
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If you can get your hands on
cashflow-positive real estate,
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meaning that it's an asset.
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I buy it, I rent it.
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And even after the insurance,
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paying a property manager
if I have to get one,
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covering repairs, covering
any cost associated,
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including insurance, real
estate taxes, all of that,
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then I'm still profitable.
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If I had to borrow money,
you even factor that in,
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and if it's net cashflow positive,
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that is a great investment,
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because inflation really pushes up,
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equity markets really
pushes up real estate,
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always has, always will.
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Number two, since we mentioned equities,
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is invest in recession-proof companies.
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What type of companies am I talking about?
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You can look at your Walmart, your Lowe's
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your Targets, your Apple, your
Adobe, O'Reilly Auto Parts.
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Coca-Cola, love Coca-Cola.
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That's one of Buffett's favorites.
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Apple's one of Buffett's favorites.
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There's a bunch in there,
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Johnson&Johnson, Kroger.
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People are still going
to eat no matter what.
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They may not go out to dinner or a movie
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but they're definitely only
going to the grocery store.
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AT&T, we're addicted to our phones.
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They're not going anywhere,
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plus all that entertainment,
all that good stuff
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even though AT&T has
taken a few shots recently
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because they lowered their dividends,
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still a tremendous yield, over 4% yield.
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They're not going anywhere.
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Royal Dutch Shell,
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if you like energy, next-era energy.
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Dollar Tree, even things
like Altria and Molson Coors,
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kind of your sin companies.
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They always seem to do all right.
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If inflation is high, people
are still doing those things.
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As far as entertaining themselves,
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they're not going to deprive
themselves of a decent beer.
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Other thing you could do is
diversify your tax portfolio.
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Now the way that I diversify my portfolio
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is different than most.
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I still do this 30, 30, 30, 10.
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And what I mean is that diversification
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for a lot of people is they think,
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oh, I need to own an ETF and
I'm going to have a whole bunch
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of companies, or I'm going to
buy a bunch of mutual funds.
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The problem there is that
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you're still exposing
yourselves to equities,
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and you may have two mutual funds
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and they're each 20%,
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and they're the same company or companies,
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and you didn't diversify well at all.
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So I use a different calculation.
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I do three main areas.
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I do income-producing,
dividend-paying stocks.
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So equities that produce a
dividend that pay out a profit.
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Those that have been
historically good payers
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of dividends that increase
their dividends every years.
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Those are what I look at.
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So for example, Coca-Cola,
more than 55 years of
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increasing its dividend every single year,
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no matter whether we're in
war, no matter what's going on.
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These companies continue
to pay out dividends.
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There's a ton of them
that you can choose from.
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When I say a ton, like Dividend
Kings, there's about 30.
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When you have Aristocrats,
now you're up to about 60.
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And when you look at what we kind of call
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our challengers or companies
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that are 10 years of
increased dividend payout,
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you get around 100.
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It's a ton of them, but
it's still a small universe.
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So it's very easy for individual investors
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like me to go out there
and kind of pick it out.
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And then I'm diversifying myself
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by going into those.
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The other area where
there's 30% is real estate,
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or real estate equivalents.
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And when I'm looking at real estate,
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yes, I love single families.
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Yes, I love multifamily.
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I love commercial.
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I love self-storage.
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I like buying individual properties
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but I maybe that's not me.
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Maybe I'd like to do, instead,
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a real estate investment trust,
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is a security that represents real estate
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that's held in a holding company
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called a real estate investment trust.
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That's paying out 90%
every year of its income.
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That is a nice investment
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for me to get into where
I'm exposed to real estate,
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if I don't want to manage
my own real estate.
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Now I'm an avid real estate investor.
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I'm always going to do that,
but I'm not saying you have to.
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Another area you could get into,
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if you want to get exposed to real estate
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and you're a high net worth individual
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that you qualify as an
accredited investor,
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is you may invest in private placements
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where people are going in and
buying buildings together.
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We're binding groups of real estate.
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I've seen everything to build,
to rent, to sell storage,
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to multifamily, shared housing.
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I've seen it all this year and
we're going to see more of it
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because it's such a huge issue.
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Statistically we are
under-built in real estate
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to the tune of about three to
three and a half million units
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for the moderately housed.
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So lower-to-moderate-income housing,
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we are completely devoid,
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which means there's a huge
niche for shared housing.
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That's going to be a big deal.
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You're going to see private
placements going into that
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at these little funds where they go in
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and they buy up land, and put on rentals
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or they're buying up
buildings and doing remodel
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to put in shared housing.
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You're going to see more of that going on.
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So that's another one.
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Here's the next area.
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By the way, for diversification,
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the last section, that last
30% is managed portfolio.
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You're either doing a mirrored portfolio
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like in in our company,
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Infinity Investing,
you can go in a mirror.
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I think there's five
different portfolios in there.
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And you're just basically doing a group of
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different companies that
you're mirroring somebody else.
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So it's not just you who's
making that decision.
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You start to lean on somebody else
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or you go to a registered
investment advisor,
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we have those, too, where
somebody's charging you
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maybe 1% to manage a portfolio.
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The whole idea is that you're
stepping back from control
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and allowing somebody else
to start making those calls,
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but without paying these exorbitant fees
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like that are in mutual
funds and things like that
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where it's five to times as high.
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What I'd prefer is that you do something
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where if you're mirroring a portfolio,
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it literally costs you nothing.
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You're just saying, hey,
here's the portfolio.
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I'm just going to mirror
this set portfolio
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and go about my business, the last 10%,
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so I go 30, 30, 30, 10.
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10 is really cash or cash equivalence.
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That's your goal in silver and crypto
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which we'll get to here in a second.
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That's where you're putting a small amount
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of your portfolio.
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That's easily to liquidate
fund that's available to you.
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And so it's going to be US dollars.
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It might be silver.
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It might be some gold.
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It might be some Bitcoin,
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but it's not going to be more
than 10% of your total portfolio.
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All right, next area
we're going to get into
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is to buy Treasury
Inflation-Protected Securities.
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They're called TIPS.
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And what it is is the principle
is adjusted for inflation.
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So you may be using something
like a Bloomberg methodology.
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You may be using some version of the CPI,
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but it's index for
inflation on the principle
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of the bond that you're buying.
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So let's say that it's a 1% yield
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and you're like, oh that's really great,
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but it's indexed for inflation.
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So if inflation goes up,
and let's say it goes up 4%,
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well, your principle goes up 4%.
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And the 1% coupon rate is
based on the principle.
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So let's say that I put
1000 dollars into something.
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It's indexed for inflation.
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It goes up 5%.
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So now I have $1,050,
and I get 1% of that.
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So I'm going to get what?
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$10 and 50 cents on top of it.
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So overall I did okay.
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Hey, it's better than
sitting it in a savings plan
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which is next to nothing right now, right?
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There's just nothing there.
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The interest rates are so low.
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You not making anything.
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This way at least I'm hedging
myself against inflation.
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It's called TIPS.
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And there's a lot of money
that's been dumping into it
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because people are
scared of this inflation.
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So they're running into that.
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How about precious metals,
gold and precious metals?
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So maybe I'm going to go into that realm.
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Now I'll just tell you,
not the biggest fan.
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I tend to like assets that pay me,
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so precious metals like gold and silver,
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I'm putting in that 10% sliver.
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The vast majority of my portfolio, 90%
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is in income-producing types of assets.
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But you can go in there to
hedge against inflation.
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Speaking of hedge against
inflation, a lot of people think
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cryptocurrency is a great place to go,
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if the US dollars getting beat up,
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and inflation is causing problems.
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The only issue I have is
that it seems to mirror
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that kind of the inflationary numbers.
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Crypto, especially
Bitcoins, reacted negatively
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when inflation numbers have come out
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and it's like, whoa it
seems to be tying there,
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even though instinctually
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you say it's a hedge against inflation.
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I'm not saying don't buy crypto.
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I'm just saying buy crypto, knowing that
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it hasn't been doing exactly
what it's advertised to do.
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And that is that it seems to be affected
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when the inflation numbers come out.
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I'm not going to say don't buy it.
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I'm going to say, keep
it in that 10% realm.
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I own Bitcoin.
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I own Ethereum.
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I don't see why everybody
would not be exposed
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to some of that.
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Last area is the option trading,
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one of the best things I can do
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if I have a portfolio
that's kind of stale.
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So I have a bunch of securities
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and I'm worried about inflation
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is they're not going to jump up.
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By the way, avoid growth
stocks like the plague
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during an inflationary cycle.
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One of the things we're going
to see to combat inflation
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is they're going to raise
interest rates and that makes it
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much more expensive to
be a growth company,
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because they're basically looking for debt
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and they're looking for
shareholders, right?
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The shareholders are buying
their company to raise money.
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So they're doing it through
debt or shareholders.
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When shareholders no longer like it,
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guess what they're going?
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They're going to go out there and get debt
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and debt's becoming more expensive.
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So avoid those.
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But if you do have companies that are good
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like you have good
inflation-protected companies
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in recession-proof
stocks, things like that
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where you're not too worried
about the overall economy.
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These are good companies.
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Again, your Walmart,
your Lowe's, your Targets
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your Coca-Colas, your AT&Ts, all these.
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One of the things that you can
do is sell options on them.
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I'm not going to say buy options
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because I think that's gambling.
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You sell options when
you own the security.
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So I could even sell an option,
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if I like a security, like,
hey, I want to buy Walmart.
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I could sell a put, take that money in.
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And then if somebody puts me the stock
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it makes me buy it at my put price.
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I was going to buy the company anyway.
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So I just got it for a little bit cheaper
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because I got that little
bit of premium there.
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So even if I'm like, hey
I'd like to buy Walmart
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at whatever the price it is.
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I could sell a put for that.
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I get that extra money.
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Plus if I end up getting
the stock put to me.
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Now I have it and I can
sell an option on it
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and generate some more revenue that way.
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How much can you generate
between six and 12% a year
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really on the sale of options?
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That's what I've seen.
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That's what we use inside
of our Infinity portal
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is that we're generally
looking at companies
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where there's enough premium
to make it worth buying them.
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And so now you have five
good ideas to combat this
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in high inflationary cycle.
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And then you're not going
to be looking at it going,
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oh, woe was me and
jumping out of the market.
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Do not do that, please.
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Every time there's a recession,
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people go out there and dump.
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Every time inflation's going
high, people start to freak out
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and they dump.
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Do not be that person
because history has showed us
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one thing which is it's all
about the long term, baby.
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And nobody can time this.
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You just keep holding on to
good companies and you wait.
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You take this right hand,
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and stick it underneath
that right butt cheek.
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Take your left hand, put it
underneath that left butt cheek.
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And sit on your hands and wait,
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because you get rewarded when
you buy really good companies
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and you're patient
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and you're willing to
go through these cycles.
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In the meantime,
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you have some other things
you can diversify into
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or even ways to generate additional income
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off of those companies,
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while you wait for
whatever's going to happen
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with this inflationary cycle,
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while you wait for the Fed to
start jacking interest rates
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over and over and over
again over the next year.
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That's what you do is you say,
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hey, you know what I'm going to
make money on in the meantime?
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And I'm going to protect myself.
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Here's some things I can get into.
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So I just gave you five.
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There's obviously more,
but if you get into
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those five areas, you're not
going to be disappointed.
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And you're just going to go through this
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like hot knife through butter.
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You're going to be just
as happy as a clam,
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going, geez I am so glad
that I restructured myself
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or looked at it differently.
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And by the way, every time
that there is a downturn
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look at it as everything's on sale.
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It's a great buying
opportunity to continue
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to increase your investments.
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And if you're smart about it
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and you focus on those five areas,
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you're going to be way ahead of the curve.
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