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.

Outlines

00:00

💡 Understanding the Illusion of Bank Interest and Real Interest Rates

This paragraph explains the misconception that money in a bank automatically grows due to interest payments. It introduces the concept of real interest rate, which is the nominal interest rate adjusted for inflation. The script uses an example of depositing $100 at a 2% interest rate and the impact of 8% inflation, showing that despite earning $2 in interest, the purchasing power of the money decreases. It emphasizes that a negative real interest rate means you can buy fewer goods with the same amount of money. Historical data on real interest rates from 1982 to 2022 for France, Germany, Japan, the United States, and the United Kingdom is mentioned, highlighting a shift from positive to negative rates post-2009. The paragraph concludes by suggesting that investing in assets that outpace inflation is crucial and proposes gold as a historical hedge against inflation.

05:02

📈 Diversifying Investments with Gold, Industrial Commodities, and Safe Haven Currencies

The second paragraph discusses alternative investment options to traditional bank deposits. It starts with the recommendation to invest in gold, citing its value retention and growth over the past two decades despite inflation. The script mentions the potential for gold prices to quintuple by 2032 according to Prime XBT. It then explores investing in industrial commodities, particularly lithium, which is crucial for various industries and has seen significant price increases. The paragraph also touches on safe haven currencies like the Swiss franc, which are stable during financial crises. It provides examples of how these currencies perform during global instability, such as the 2008 financial crisis and the 2022 sanctions on Russia. Lastly, it suggests government debt as an investment, explaining how bonds work and why they are considered a safe investment, especially for the US government.

10:03

🏢 Exploring Stock Market Investments, Real Estate, and REITs

The final paragraph focuses on investing in the stock market, differentiating between value stocks and growth stocks. It highlights the stability of value stocks and the potential dividends they offer. The script also introduces mutual funds as a way for average investors to diversify their investments without extensive research. It mentions the Black Rock growth fund as an example of a successful mutual fund. Additionally, the paragraph discusses investing in land and real estate as a long-term strategy against inflation. It debunks the myth that significant capital is needed to enter real estate by explaining Real Estate Investment Trusts (REITs), which pool money from various investors to invest in properties. The paragraph concludes by encouraging viewers to engage with the content through comments, which are valued by YouTube's algorithm.

Keywords

💡Interest Rate

The interest rate is the percentage at which banks pay for deposits or charge for loans. In the context of the video, it is crucial because it determines the return on savings. The video discusses how the real interest rate, which factors in inflation, is a critical measure for understanding the true growth of one's money in the bank.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The video uses the example of chocolate prices to illustrate how inflation erodes the purchasing power of money, even if the nominal amount in a bank account increases due to interest.

💡Real Interest Rate

The real interest rate is the interest rate that has been adjusted for inflation. It is a key concept in the video, as it helps to determine whether the return on an investment outpaces the rate of inflation. A negative real interest rate implies that the cost of living is increasing faster than the interest earned on savings.

💡Gold

Gold is presented as a precious metal and a store of value that historically retains its worth despite inflation. The video highlights gold's performance over the years, showing how it has increased in value, thus serving as a hedge against inflation and a potential investment alternative to bank deposits.

💡Industrial Commodities

Industrial commodities such as cobalt, nickel, copper, and lithium are essential materials for various industries. The video emphasizes the growing importance of these commodities, especially lithium, which is vital for manufacturing batteries. Investing in companies that mine these materials can be a strategic move due to their increasing demand.

💡Safe Haven Currencies

Safe haven currencies are stable and reliable options for investors during times of financial turmoil. The Swiss franc is used as an example in the video, demonstrating how it has been a preferred destination for funds during crises, thus maintaining or even increasing in value.

💡Government Debt

Government debt refers to the money a government borrows through the issuance of bonds when its expenditures exceed its tax revenues. The video explains that investing in government bonds, such as U.S. Treasury bonds, can be a safe investment because it is assumed that the government can always print more money to pay its debts.

💡Stocks and Mutual Funds

Stocks are shares in the ownership of a company, and mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio. The video suggests that investing in stocks and mutual funds can be a way to grow one's money, with the distinction made between value stocks and growth stocks, and the benefits of dividends.

💡Real Estate Investment Trusts (REITs)

REITs are companies that own, operate, or finance income-generating real estate. The video discusses how REITs allow individuals to invest in real estate without the need for substantial upfront capital, by pooling resources to purchase and manage various properties, which can then generate income for investors.

💡Purchasing Power

Purchasing power is the value of a currency in terms of the goods and services that can be purchased with it. It is central to the video's argument about the deceptive nature of bank interest, as increased money in the bank does not equate to increased purchasing power if inflation is taken into account.

💡Dividends

Dividends are payments made by a corporation to its shareholders, usually as a distribution of profits. The video mentions dividends as an additional advantage of investing in value stocks, as they provide a steady income stream in addition to any potential increase in the stock's value.

Highlights

Putting money in the bank may not always result in growth due to the impact of inflation.

The real interest rate is calculated by subtracting inflation from the interest rate banks pay on deposits.

When inflation is higher than the interest rate, the real interest rate is negative, reducing the purchasing power of money.

Investors should aim to beat inflation to ensure their gains outpace the increase in prices.

Since 2010, real interest rates in major economies like the US, UK, France, Germany, and Japan have been mostly negative.

Gold is considered a store of value and has historically outperformed inflation rates.

Investing in gold can be done through shares of companies in the gold industry, such as Franco Nevada Corporation.

Industrial commodities like lithium are essential for various industries and are expected to play a significant role in the global economy.

Investing in safe haven currencies like the Swiss franc can be a stable option during financial crises.

Government debt, such as US treasury bonds, is considered a safe investment as the government can print money to fulfill its debts.

Investing in stocks and mutual funds allows individuals to put their money to work with less research and time investment.

Value stocks are more stable than growth stocks and often provide dividends as an additional benefit.

Real estate investment trusts (REITs) allow small investors to invest in real estate without the need for large sums of money.

Land and real estate are considered commodities that never lose value due to their scarcity and constant demand.

Investing in REITs is like investing in a mutual fund that focuses on real estate properties rather than stocks.

The income generated by properties managed by REITs is distributed among the investors.

The video provides various investment alternatives to consider for profiting above inflation and diversifying investments.

Transcripts

surely you've been sold the idea that

putting your money in the bank makes it

grow but the reality is different that

is to say when you make a deposit the

bank gives you interest in return which

means extra money this may sound like a

good idea but behind all this lies a

hoax while you keep your money the

government steals from you through

increases in the prices of goods and

services even though our money in the

bank account increases thanks to the

interest they pay us this does not mean

that now we can buy more products than

before why is that let's break it down

in economics there's a concept called

real interest rate which is basically

the result of subtracting the effect of

inflation from the interest rate that

Banks pay for the deposits people make

with them it may sound like Chinese but

it's actually very simple let's say you

decide to deposit $100 in a bank that

pays a 2% annual interest rate that

means at the end of your deposit after 1

year you'll have

$102 the $100 you deposited plus the $2

in interest so far so good you've made

money simply by keeping your money in

the bank but now if you consider that

inflation during that time was let's say

8% was your deposit a great investment

the answer is no previously when you had

$100 you could buy 50 chocolates at $2

each but if this year inflation was 8%

it means chocolates now cost

$2.16 and with your

$12 you can now Buy 47 chocolates in

other words you have more money than

before but the purchasing power of these

bills has failed when the inflation rate

is higher than the interest rate it is

said that the real interest rate is

negative now you can buy fewer things

than before whereas when the opposite

happens that is when inflation is lower

than the interest rate the bank pays the

real interest rate is positive

considering this concept is very

important when investing because your

goal as an investor whether you're a

beginner or an expert should always be

to beat inflation that is try to ensure

that your gains are above the increase

in prices now what has happened in

recent years was it a good idea to leave

your money in the bank this graph shows

us the real interest rate of France

Germany Japan the United States and the

United Kingdom from 1982 to 2022 we can

see how these five economic Powers until

2009 mostly had a positive real interest

rate that is to say the interest Banks

paid was higher than inflation whereas

since 2010 they have mostly been

negative inflation surpassed the

interest rate in simple terms it's not

even a good idea to deposit money in the

bank in the wealthiest countries in the

world and it's most likely that for this

year it will also be a terrible decision

to bet on banks since the Federal

Reserve of the United States which

decides the interest rate Banks charge

and pay is expected to lower them in

2024 so when the world's leading

economic power the United States decides

to lower its interest rates all other

countries will do the same therefore in

this video we will mention some

investment Alternatives that will allow

you to make profits above inflation and

above all forget about Banks according

to history JP Morgan a famous American

Banker said that gold is money

everything else is Credit in other words

precious metals like gold are the ones

that have value and accumulating them

generates wealth meanwhile the bank

notes issued by governments are simply a

means of payment that is they only serve

to buy goods and it's not convenient to

hoard them because they lose value due

to inflation do you know why people

trust the dollar because they see it as

something valuable to save and use in

the future but here's a problem the

American government has been printing

money in recent years as if there were

no tomorrow to pay its expenses whether

building a bridge or paying its employee

salaries so what's the problem with that

as more Bank notes are printed the

dollar tends to lose its value from 2001

to 2024 the price of goods and services

in the United States increased by almost

80% but how did precious medals like

gold Faire during this same period of

time an ounce of gold which was priced

at

$264 in early 2001 has increased by over

650 surpassing $2,000 in 2024 that is to

say if a person had invested $1,000 in

Gold 23 years ago they would have around

7,600 $ today clearly the price of gold

was much higher than the American

inflation rate according to Prime xbt an

online platform for stock trading the

price of gold could multiply by more

than five and exceed $10,800 by the year

2032 we've seen how despite inflation

being out of control in recent years

gold has had very good returns now the

question we must ask ourselves is how

can we invest in gold after all we're

not interested in discovering a mine we

simply want to make money well nowadays

thanks to technological iCal advances

anyone can invest in gold through their

computer and without leaving home it's

no longer necessary to buy physical

metal and keep it a quick way to do it

is to buy shares of companies in the

gold industry when you buy shares you're

buying a small part of the company so if

the company does well its shares will

increase in value and thus you'll make

money they often replicate the movement

of gold meaning that when the price of

gold Rises so do their shares an example

is Franco Nevada Corporation a Canadian

company that invests money in mining

projects in exchange for a share of the

revenue generated by the sale of the

extracted Metals the shares of this

company which were priced at $7 in 2007

increased by over 600% surpassing $100

in January 2024 the second investment

idea for this year is industrial

Commodities these materials like Cobalt

nickel copper and many others are

essential for many Industries and will

surely play an important role in the

global economy in the coming years

perhaps the best example is lithium

often called the new white gold lithium

is the chemical element used in the

manufacturing of rechargeable batteries

glass special Ceramics some psychiatric

treatments and many other Industries it

comprises about 95% of all types of

batteries from cell phones to

automobiles in 2020 the price of lithium

carbonate for Batteries which was worth

$8,000 multiplied by more than eight in

Just 2 years surpassing $70,000 in 2022

what does this mean having some of these

materials on your investment list can be

a smart move because in the coming years

the world will shift from using fossil

fuels like oil to using renewable

energies like solar and wind this has

caused their demand to Skyrocket in

recent years similar to Precious

materials like gold and silver not

everyone can invest large amounts of

money in these Commodities or store them

physically therefore a good way to

invest in these types of materials is to

buy shares of companies in these

industries for example mineral resources

limited is an Australian company engaged

in lithium mining energy and other raw

materials the company share which were

trading at

$15.40 in February 2019 have increased

by over

350% reaching over $70 if you had

invested just $200 in shares of this

company you would have nearly $800 today

not bad right the third investment

opportunity for 2024 is safe haven

currencies here we refer to those

currencies that investors consider as

safe and stable options during periods

of financial crisis these are currencies

that usually maintain their value

compared to others an example of this

type of currency is the Swiss frank

during times of chaos and financial

disorder such as the 2008 financial

crisis many millionaires often send

their money directly to Switzerland why

do they do this to prevent their money

from losing value this graph shows us

the financial account indicating the net

amount of money entering Switzerland in

relation to the size of its economy it

went from

0.54% in 2008 to 8.8% in 2009 to better

understand the amount of money from a

abroad that entered the country during

the 2008 crisis multiplied by 16 the

Swiss frank is a refuge currency in

these difficult situations in February

2022 the United States and the European

Union imposed sanctions on Russia for

its aggression towards Ukraine these

were measures that prohibited the

Russian government from accessing

European financial markets and imposed a

commercial embargo so when a country

cannot buy or sell towards the United

States it doesn't necessarily need

dollars now imagine that country is a

world power like Russia this caused the

Swiss frank to be in demand by almost

everyone due to Switzerland's economic

and political stability its solid

banking system and its key role in the

world economy Switzerland has been the

birthplace of several important

companies in different fields from food

like Nestle to finance like UBS one of

the largest financial institutions in

the world all these major companies

generate demand for Swiss Franks in

international trade thus strengthening

the currency's value it went from being

worth $16 in March 2023 to nearly

$120 in December those who held Swiss

Franks increased their wealth in a

matter of months without having to do

anything now do you understand why the

rich often keep their money in Swiss

banks simply because they prefer to have

their wealth in Swiss Franks rather than

dollars the fourth investment idea is to

by government debt when a government

spends more money than it collects in

taxes it must borrow it from its

citizens this borrowed money is called

government debt similar to when you use

your credit card and have to pay it back

later the government issues things

called bonds to obtain this money people

companies or even investors from other

countries by these bonds and in return

the government agrees to pay them back

with a bit of interest for example in

the case of the US government IT issues

what is known as treasury bonds these

bonds are considered the safest

investment in the market because it is

believed that the United States

government can print as much money as it

wants therefore it will always have the

resources to pay its debt in dollars but

what about governments of other

countries that cannot print dollars to

pay their loans the government of Any

Nation will always try to fulfill its

debts if the government does not pay its

debts it can have serious consequences

for the country people lose confidence

in it and interest rates rise because no

one wants to buy government bonds so

they raise the interest rates to attract

buyers but of course this increase in

interest rates also affects the rates

that Banks charge when people ask for a

loan so the economy will have less

investment and growth therefore

governments will always try to pay their

debts to avoid having all those problems

we could say then that one of the safest

ways to invest is simply to lend money

to the US Government however you

shouldn't trust just any government

another option is to invest in stocks

and mutual funds this is probably the

easiest way to put your money to work as

mentioned before stocks are like small

parts of companies traded on the stock

exchange and when these companies do

well you make money but there's

something important you should know not

all stocks are the same in the stock

market there are two types of stocks

value stocks and growth stocks growth

stocks like those in the technology

sector are riskier because they focus on

innovative ideas and technologies that

may not work on the other hand value

stocks like the company new cor that

deals with Industrial Metals are more

stable because there is a constant

demand for those Metals value stocks

also have an additional Advantage

dividends these are payments that

companies give you simply for owning

their stocks but of course researching

all the stocks on your own can be

complicated and timeconsuming this is

where mutual funds come in they are a

kind of Club where many individuals or

companies pull their money to invest so

that a group of Finance Specialists

manages that money to try to make it

grow for example with the money obtained

the fund decides to buy stocks traded on

the stock exchange if those stocks later

increase in value or pay dividends this

gain will be distributed among all the

people or companies that contributed the

initial money These funds are ideal for

average investors or those without

experience in finance because they allow

you to invest in many companies without

having to do all the research yourself

an example is the Black Rock growth fund

which had a profit of 42% it was the

American fund with the highest

performance in 2023 this fund is

composed of stocks from large companies

like Microsoft Amazon Nvidia visa and

many others another alternative for this

2024 is to buy land and real estate very

often Finance experts say that land is a

commodity that never loses value and the

reason is simple it's scarce and very

useful we need land for housing schools

factories and even for farming and with

more people living on this planet the

demand never decreases both land and

properties are a good way to protect

against inflation in 199 2 the average

price of homes which was

$119,500 has increased by almost 250% to

reach

$417,000 having some investment in real

estate is like a kind of insurance so

that your money doesn't lose value due

to inflation however most small

investors don't consider entering the

real estate sector because they believe

that to invest in this sector you need a

lot of money but is it really true the

truth is that it's not because there's

something called Reit which stands for

real estate investment trust AIT is

basically a group of people who pull

their money to invest in real estate

properties this allows people who don't

have tens of thousands of dollars Sav to

invest in the real estate market without

having to buy an entire house think of

Reit as a mutual fund but instead of

investing in stocks it invests in real

estate how does it work they buy and

manage properties such as Office

Buildings shopping centers hospitals or

even Elderly Care facilities and then

the income generated by these properties

is distributed among the Reit investors

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