Brexit concerns are overblown and will not bring death to the markets, as many of the elites in government and finance are saying. What Brexit has done, like so many other government-created crises before, is to provide a clear reminder to investors that real estate and other hard assets should be at the center of the wise investor’s portfolio.
Real estate tends to hold its value, generate more stable returns, and therefore, be less vulnerable in volatile economies. It may be a particularly useful investment in the current post Brexit climate. Consider below the connection between Brexit, hard assets and your portfolio.
If your portfolio is primarily composed of so-called paper assets, like stocks, bonds and most financial instruments, then your financial security hinges on the value of your country’s currency. If the currency devalues, so does your portfolio. If the currency inflates, so does your portfolio.
That’s what happened in recent days. One of the immediate repercussions of Brexit was a substantial plunge in value of the British Pound, which immediately devalued everything that’s valued in this currency. When cash itself loses value, assets based on cash also lose value.
But the situation is different for investors in hard assets like real estate or precious metals. Consider the investor who owns several rental properties. Even if a national currency were to disintegrate, there would still be intrinsic value in real estate.
That’s because real estate is useful. It can house your family. It can be leased in exchange for other items of value. It can be traded or sold for things that support and sustain life. Real estate is fundamentally valuable because there’s a limited supply, and the need for it extends to everyone.
The value of real estate and other hard assets is not limited by cataclysmic scenarios in which governments or economies face collapse. Hard assets have the additional benefit of hedging against another serious threat that’s far more common than Brexit level upheavals: Inflation.
How should a wise investor go about acquiring real estate in their portfolio, particularly for the investor who has little or no experience with it?