Ray Dalio says your cash savings aren’t safe and will be ‘taxed by inflation’ – build a hedge with 3 alternative places to store your money – News Couple
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Ray Dalio says your cash savings aren’t safe and will be ‘taxed by inflation’ – build a hedge with 3 alternative places to store your money


Ray Dalio says your cash savings aren’t safe and will be ‘taxed by inflation’ – build a hedge with 3 alternative places to store your money

Some say that criticism is king. But according to Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, it may not be wise to keep a lot of investing money in cash these days.

“Cash is not a safe investment, and it’s not a safe place because it will be taxed because of inflation,” Dalio told CNBC last month.

Dalio’s concern came after US inflation reached a 31-year high in October.

Prices continued to rise. In November, the CPI rose 6.8% year over year, marking its fastest increase since June 1982.

Simply put, consumers take a huge hit in their purchasing power.

So let’s take a look at three ways to hedge against inflation – one of which might be worth swooping in on some of your extra cash.

gold

Gold bars in a bank safe deposit box

Maxx-Studio / shutterstock

Gold is often considered a safe haven asset.

It cannot be printed out of thin air like paper money, and its value is largely unaffected by economic events around the world.

The yellow metal has helped investors preserve wealth for centuries. Some think this might be another one of her shining moments.

You can buy gold coins and bullion at your local bullion shop. You can also take a look at the big gold mining companies. If gold prices go up, these miners will get higher revenues and profits, which tend to translate into higher stock prices.

For example, companies like Barrick Gold, Newmont, and Freeport-McMoRan are doing well during tough times for other sectors.

There is no need to start big. These days, you can build your own diversified portfolio using just your leftover nickels and digital dimes.

Bitcoin

A person holding a bitcoin next to the letter T logo on a Tesla car

Salarco/Shutterstock

Once Bitcoin was considered a niche asset, it entered the main stage.

One of the reasons people are increasingly adopting cryptocurrencies is that they believe in their potential as an inflation hedge. Central banks can print money whatever they want, but the number of bitcoins is 21 million by mathematical algorithms.

Dalio recently said that Bitcoin is “almost the alternative of the younger generation to gold.”

Bitcoin price has fallen significantly in recent weeks, but is still up 60% year-to-date. If you want to buy Bitcoin directly, be aware that many exchanges charge up to 4% commission fees just for buying and selling cryptocurrencies. Some investment apps charge 0%.

Investors can also gain exposure through companies that have connected themselves to the crypto market.

For example, the software technologist MicroStrategy has built a stockpile of 122,478 bitcoins. Electric car giant Tesla owns about 43,200 bitcoins.

Then there are pick and shovel plays like Coinbase Global, which operates the largest cryptocurrency exchange in the US

True, these companies are all very expensive, trading between $238 and $899 per share. But you can get a smaller piece of Tesla or Coinbase using an app that allows you to buy chunks of stock with as much money as you’re willing to spend.

Sophisticated art

Young woman wearing a mask and holding sunglasses looking at framed photos in an art gallery

GENOSH/Shutterstock

Stocks are volatile, cryptocurrencies are making big swings on either side, and even gold isn’t immune to market volatility.

That’s why if you’re looking for the ultimate hedge, it might be worth checking out a real, but overlooked, origin: fine art.

Contemporary artwork has outperformed the S&P 500 by 174% over the past 25 years, according to Citi Global Art Market Chart.

It has become a popular way to diversify because it is a real physical asset with little connection to the stock market.

On a scale of -1 to +1, where 0 represents no link at all, Citi has found that the correlation between contemporary art and the S&P 500 has been just 0.12 over the past 25 years.

Earlier this year, Michael Harnett, chief investment officer at Bank of America, cited artwork as a good way to outperform over the next decade — in large part due to the asset’s track record as an inflation hedge.

Investing in art by the likes of Banksy and Andy Warhol was only an option for beginners, like Dalio. But with a new investment platform, you can invest in famous artworks just like Jeff Bezos and Bill Gates.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.



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