In times of crisis in particular, many investors are afraid of increasing inflation. Should you, therefore, shift your assets from monetary assets to tangible assets?
Inflation is the periodically recurring evidence of the fact that printed paper is printed paper. It has also been historically proven time and again those permanent assets were only built up with material assets.
But what is the difference between real and monetary values?
As the name suggests, tangible assets are assets that exist in physical form. This includes, for example, real estate, gold, silver and stocks, but also investment funds that invest in real assets or ship investments.
In contrast, monetary values represent a form of investment that is based on our paper currency. Typical monetary values are, for example, cash, savings books, fixed-term deposits, building society contracts as well as capital-forming life insurances or pension insurances.
Monetary values can become problematic when the amount of paper money in circulation is no longer covered by gold reserves. In this case, the money supply and national debt continue to grow. It is now known from history that a paper money system has rarely survived for more than two or three generations.
Real assets are more inflation-proof
Sooner or later there will be a devaluation. This can happen slowly or suddenly. In both cases, pure investments lose their value. Material goods such as real estate, land or gold will be physically preserved and will increase in value again after the crisis has been overcome.
If you are planning an individual investment strategy, you should take this into account. As a recommendation, monetary assets are primarily suitable for securing everyday life. You can park a few salaries on a savings account or as daily money to pay for unforeseen repairs such as a broken washing machine.
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In the medium to long term, however, you should invest your capital in real assets in order to secure your purchasing power and not to lose all of your capital in the event of creeping or sudden inflation.
