Put Your MONEY in These 6 Assets Instead of BANKS

Summary

The video script explores the concept of real interest rates and their impact on savings, highlighting how inflation can erode the purchasing power of money despite interest earned from banks. It suggests that since 2010, real interest rates in major economies have been negative, making traditional bank deposits less attractive. The video offers alternative investment strategies to beat inflation, including investing in gold and precious metals, industrial commodities like lithium, safe haven currencies such as the Swiss franc, government bonds, stocks and mutual funds, and real estate through Real Estate Investment Trusts (REITs). It emphasizes the importance of diversifying investments to maintain and grow wealth in the face of economic challenges.

Takeaways

• 💡 Banks pay interest on deposits, but this does not necessarily mean your purchasing power increases due to inflation.
• 📉 The real interest rate is calculated by subtracting the inflation rate from the interest rate, indicating the true growth of your money.
• 🌐 Since 2010, real interest rates in major economies like the US, UK, France, Germany, and Japan have been mostly negative, suggesting it's not ideal to just deposit money in banks.
• 📉 When inflation is higher than the interest rate, the real interest rate is negative, meaning the purchasing power of your money decreases over time.
• 💰 Investing with the goal of beating inflation is crucial for maintaining and growing your wealth.
• 🤑 Gold is considered a store of value and has historically outperformed inflation rates, making it a good investment alternative.
• 📈 Investing in gold can be done through shares of gold industry companies, which often replicate the price movements of gold.
• 🔋 Industrial commodities like lithium and cobalt are essential for various industries and are expected to play a significant role in the global economy, making them attractive investment options.
• 🏦 Swiss francs and other safe haven currencies can be a stable investment during financial crises, maintaining their value better than other currencies.
• 💵 Government debt, such as treasury bonds, is considered a safe investment as governments are likely to fulfill their debt obligations to maintain economic stability.
• 📊 Stocks and mutual funds offer a way to invest in companies and diversify risk, with value stocks and dividends providing more stability and potential for income.
• 🏠 Real estate and REITs (Real Estate Investment Trusts) are long-term investments that can protect against inflation and provide a steady return through property value appreciation and rental income.

Q & A

What is the main idea behind the concept of real interest rate?

The real interest rate is the result of subtracting the effect of inflation from the nominal interest rate that banks pay for the deposits people make. It represents the actual growth of money after accounting for the decrease in purchasing power due to inflation.

Why does keeping money in the bank not always guarantee an increase in purchasing power?

If the inflation rate is higher than the interest rate offered by the bank, the real interest rate becomes negative. This means that even though the amount of money in the bank account increases, the purchasing power of that money decreases, allowing you to buy fewer goods and services than before.

What is the significance of the graph showing the real interest rate of France, Germany, Japan, the United States, and the United Kingdom from 1982 to 2022?

The graph illustrates that until 2009, these countries mostly had a positive real interest rate, meaning the interest banks paid was higher than inflation. However, since 2010, the real interest rate has mostly been negative, indicating that inflation has surpassed the interest rate, making it less advantageous to deposit money in banks.

Why are precious metals like gold considered a good investment alternative to bank deposits?

Precious metals like gold maintain their value over time and often appreciate in value, especially during periods of high inflation. Unlike fiat currencies, which can lose value due to inflation, gold is seen as a store of wealth and is not subject to the same depreciation.

How has the price of gold performed compared to the U.S. inflation rate from 2001 to 2024?

The price of gold has significantly outperformed the U.S. inflation rate during this period. An ounce of gold, which was priced at $264 in early 2001, increased by over 650%, surpassing $2,000 in 2024, thus providing a higher return than the rate of inflation.

What is the potential future value of gold according to Prime XBT's projection?

According to Prime XBT, an online platform for stock trading, the price of gold could potentially multiply by more than five and exceed $10,800 by the year 2032.

How can an individual invest in gold without physically buying and storing the metal?

Individuals can invest in gold through various financial instruments such as buying shares of companies in the gold industry, exchange-traded funds (ETFs) that track the price of gold, or through gold mining companies. This allows investors to gain exposure to the gold market without the need for physical possession.

Why are industrial commodities like lithium considered a smart investment?

Industrial commodities like lithium are essential for many industries, especially as the global economy shifts towards renewable energy sources. The increasing demand for these materials, coupled with their scarcity, can lead to significant investment returns.

What is the role of safe haven currencies during financial crises?

Safe haven currencies, such as the Swiss franc, are considered stable and maintain their value during financial crises. Investors often move their funds into these currencies to protect their wealth from depreciation caused by economic instability or market volatility.

Why are government bonds considered a safe investment?

Government bonds are considered safe because they are backed by the government's ability to tax and print money. The U.S. Treasury bonds, for example, are seen as one of the safest investments since the U.S. government is unlikely to default on its debt.

How do real estate investment trusts (REITs) allow small investors to invest in the real estate market?

REITs pool money from multiple investors to invest in a diversified portfolio of real estate properties. This allows small investors to gain exposure to the real estate market without the need for large sums of capital to purchase individual properties.