In this article by Daniel Vogt, owner of LIEVEST AG, you will learn which factors are important in order to profit from company participations and investments in the long term.
Times are getting more and more turbulent. We suddenly find ourselves facing challenges that make it increasingly difficult to maintain our standard of living. However, one thing is certain – if you do nothing at all, if you do not invest, you have already lost. In this blog article, Daniel Vogt shows what is currently important in company participations and investments in order to profit as sustainably as possible in the long term.
No matter which media one likes to consume, the noticeable increase in inflation can be heard everywhere. To the attentive investor, it has been known for quite some time that inflation – the inflating of the money supply – has been doing its thing. The more money in the system, the higher the prices of all products rise. In recent months, this trend has accelerated in many areas. Now the question is how to counter this inflation with smart investments. So the good news right at the beginning: with wise investments you can even take advantage of inflation. Would you like to know how this works?
The first question, however, is whether to invest more in monetary assets or in tangible assets. Monetary assets are assets such as insurance policies, cash holdings, bonds, bank deposits, etc.. These suffer enormously from inflation. In addition, there are tangible assets that even benefit when inflation picks up.
Personally, I am not an advocate of putting all your capital on one side. In other words, to be invested exclusively in tangible assets. Monetary assets do suffer from inflation, but they provide flexibility. When tangible assets are cheap, you can buy them with sufficient liquidity. That’s why it always makes sense to cash out and wait for the next opportunity when investments or company participations are going well. However, if you invest everything and are perhaps tied up for decades, you may miss out on real buying opportunities. This is of course not in the sense of the inventor.
However, those who are too invested in monetary assets feel the prevailing demonetization enormously. Material goods, raw materials, precious metals, energy and even real estate become more expensive, which means nothing else than that the monetary value decreases massively.
Real estate is an investment special case for several reasons, but of a positive nature. First, they represent a tangible asset that can never become completely worthless. After all, there will always be people who want a roof over their heads and are willing to pay rent for it. The higher the value of the property and the better the location, the higher the rents that can be achieved and the more cash is generated, which is available for other investment objects. Furthermore, real estate has the advantage that it can and even should be credit-financed, because the interest rate is at an all-time low and one’s own liquidity is spared. One can achieve an enormous leverage effect in this way. At the same time, the loan is paid from the current cash flow of the rents, which increase over time because the rents are adjusted for inflation. It is hard to believe, but the higher the inflation, the faster the loan is repaid. Real estate is the only tangible asset that provides sustainable cash flow when financed by a loan.
Shares and other company investments are also elegant ways of increasing one’s own capital and defying inflationary pressures. If you have the right network here, you can access investment opportunities long before they are recognized by the market. Every crisis is also an opportunity and an inflation crisis is no exception. All that is needed is to identify those companies that are most likely to succeed in passing on the costs to the customers, because the customers absolutely need the product or service. Food, energy producers or hygiene products, but also products from the health sector, are hot tips when it comes to this issue. In addition, the higher inflation climbs, the more likely it is that investors will put their money in the stock market to escape inflation. In other words, the market as a whole is rising, which plays into the hands of early investors.
The very greatest leverage can develop when you, as an investor, are ahead of the market. That means, you recognize opportunities long before the broad market of investors recognizes them. After that, it is usually too late to really profit from a trend.
My network, which I have built up over the past decades, provides me with all the relevant information and access to such early trends. Companies at this stage sometimes even deliver the possibility of co-determination, if you as an investor are really interested in a sustainable development of the company. My company investments, which I have built up over the last decades, allow for long-term, sustainable and stable growth, which not only defies any demonetization, but even knows how to use this trend for its own benefit.
Of course, you can make money fast in different ways. There is the possibility to make thousands of percent via crypto investments, within a few days. However, this form of investment has nothing to do with an entrepreneurial mindset or with planning ability. As an investor, you should try to bring your own success under control. This works best through stable and sustainable company investments, through high-quality real estate investments and through the necessary flexibility and liquidity. When these elements are brought into perfect harmony, it is now only a matter of time before personal investments bear wonderful fruit. Read more about the investment mindset in this blog article.