Owning Land as a Hedge Against Currency Devaluation

With inflation recently hitting its highest since 1981, many investors are looking for ways to hedge against currency devaluation. Historically, much of the stock market moves in unison with inflation, meaning stocks take hits as prices for goods and services grow. And this can be a scary thing for anyone whose savings are mainly tied to the stock market. 

But there are ways to hedge against the kind of currency devaluation we’re experiencing this year. One way is by owning real assets — and land is an attractive option. “Hedging” is just one benefit of owning land — but a major one. So read on as we explore owning land as a hedge against currency devaluation. 

What is Currency Devaluation?

There are a couple of different causes of currency devaluation. In global economic terms, currency devaluation is when a government purposely devalues its currency when compared to another country’s currency for economic benefits. However, in this article, we’re talking about currency devaluation because of inflation. 

As the costs of goods and services rise to unhealthy levels, it lowers the value of the US dollar. Some inflation is expected and even a sign of a healthy economy. But when inflation rises as much as we’ve seen in 2022, it’s something to be concerned with. 

It’s not just the money in the bank that takes a hit when inflation is high. It’s also money invested in the stock market, since stock prices are usually more volatile when inflation is high. 

And since no one has a crystal ball to see into the future (even if they say they do), it pays to be prepared for inflation and the consequent currency devaluation. Doing this is often called “hedging,” which brings us to the traditional hedges against inflation. 

Traditional Hedges Against Inflation

There are a handful of historically sound hedges against inflation. Gold is one that many people think of. This is considered a real asset, meaning it’s physical and‌ limited in supply. However, simply buying and holding gold has some downsides in times of inflation. Interest rates tend to go up when inflation is high, which means a high-yield savings account might be a better option than gold, depending on the severity of the inflation and the amount saved. 

Bonds and commodities are both good hedges against inflation, and should be part of a diversified investment portfolio. However, commodities can be very volatile, which means investors take on a fair amount of risk when investing in them. 

Land has also been an excellent hedge against inflation, for many reasons. 

Land is an Excellent Real Asset

Like gold, land is a physical asset that has a leg up on other investments because of supply and demand. There’s only limited land available, which gives it intrinsic value. And unlike gold, real estate prices tend to rise with inflation. This is one reason ‌land is an ideal hedge against investment. 

But for purely investment purposes, land needs to be carefully considered. Raw land can make for an excellent investment, but it requires some due diligence and research. Investing in land has a lower barrier for entry than investing in other types of real estate. But this doesn’t mean you should go into it lightly. Like any investment, it’s good to know what you’re getting into before purchasing land.  

Ways to Invest in Land to Hedge Against Inflation

There are two principal ways to invest in land as a hedge against inflation. They are: purchasing land outright and investing in REITs. 

Purchasing Land Outright

At Land Elevated, we’ve helped people purchase land for all kinds of reasons. Some want to build a home or a cabin on the land. Others want to have a place to pass on to their kids or grandkids. And still others just want a place to go camping or hiking. These are all different kinds of investments in themselves. Of course, there are people who want to invest in land purely for investment purposes and to hedge against currency devaluation. 

We find that those best suited for purchasing land outright are people who want to invest in land and use it in addition to using it as a hedge. Whether this means hunting and camping, building a home, or even just parking the RV, doesn’t really matter. What matters is that they enjoy the land while it’s acting as an investment. Plus, any improvements you make to the land will increase its value and serve as a further investment. 

With all the amazing American land for sale out there, it only takes a little searching and some due diligence to find the perfect property for your specific wants and needs. And our Land Specialists are here to help you find the land. They’ll answer any questions you have and assist you with the process for free, whether or not you purchase! You can contact one of our Land Specialists here. 

REITs

REITs are Real Estate Investment Trusts. These are public companies that offer exchange-traded funds (ETFs) you can purchase much like traditional stocks. Essentially, this is a way to invest as much or as little money as you want into a real-estate-based company. 

The big downside with REITs is they’re not exactly a real asset. They’re based on real assets, but you won’t have the ability to go visit or spend time on the land or real estate you’re invested in. And you have no control over how that land is used. Your options are to buy, sell, or hold, like other stocks. 

Conclusion

Land should be a staple in any diversified investment portfolio because it has historically been a good hedge against inflation. And it’s never been easier to invest in land. Luckily, there are a couple of ways to do this. If you’re a hands-off person who is okay with investing in land you’ll likely never see, then REITs are the way to go. 

But if you want to be able to see the property — your property — it’s much more rewarding to purchase land through Land Elevated. You can then enjoy the land and the peace of mind that comes with knowing your investment is in good hands — your hands!