Inflation is averaging 2.5% a year for the past decade and a half. Your portfolio must have grown almost 30% in the same time period – just to keep it’s true value.
With the S&P 500 still trading at the same levels as 13 years ago, many investors are looking at portfolios that show no growth and in reality have declined in true value by over 25%.
Traditional Investing Offers Few Solutions
Investors have few options when it comes to conservative investments that also hedge against inflation.
Traditional advice tells you the ideal inflation hedge would be gold or other precious metals. While these assets typically appreciate nicely during high inflation, they are also extremely volatile during these cycles. Further, these investments offer no yield and have no tax advantages.
Multifamily Investing as an Inflationary Hedge
We recently came across a thoughtful article on commercial real estate as a hedge against inflation.
As the author explains, commercial real estate is not completely immune to inflation’s effects. But it does offer investors unique buffers that protect them from all but the most extreme inflationary scenarios.
Multifamily apartments are particularly resistant to inflationary headwinds. Shelter is a basic necessity and consumers will look to cut other expenses before finding an apartment with lower rent.
Further, short-term leases offer apartment owners more flexibility to raise rents along with the market. This is an advantage that other commercial real estate investment types don’t have, as their lease duration is typically much longer and is forced to weather inflationary periods.
The time is now to protect your wealth against the silent tax of inflation. While some investment options can act as an inflation hedge, only commercial real estate can provide steady yield and unique tax benefits.