During turbulent times, avoiding new financial decisions and refraining from new investments seems to make sense. However, when looking back at history, to the experiences of those who have become wealthy, one thing becomes clear: The most successful do not do what everyone else does. Investors who prosper are the ones who see opportunity in a downturn.
Recession creates opportunity
Even during the Great Depression of the 1930s, huge fortunes were made. The Kennedy, Rothschild and Rockefeller families all dramatically increased their holdings and their wealth throughout the depression.
John D. Rockefeller stated: “These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.”
It has been reported that in the 1930s, Rockefeller leveraged everything he owned to buy products on the cheap, knowing he would be exponentially richer when they inevitable rose in value again.
In times of high inflation, investors should own real assets
It is likely that governments throughout the world will be printing money, devaluing their currencies and, in that way, encouraging inflation to reduce the real value of their debts. This means that cash is the worst asset to hold, as interest rates remain low and rising inflation reduces its purchasing power. Legendary investment guru Jim Rogers (co-founder of the Quantum Fund with George Soros) advises his clients to buy physical assets, as these tend to go up in value in line with inflation. Unique and scarce assets will obviously do even better.
Around the world, the stock market, pension schemes and savings plans are performing poorly and without doubt, real estate has also suffered during the last few years. There will be a whole series of difficulties over the next 20 years. We will see recessions, currency crises, booms and busts. But when looking at any 20-year trend, property values always seem to withstand these ups and downs better than many other asset classes.
The currency dilemma
Exchange rates and currency fluctuations are hard to predict, and the future of the Euro is widely discussed. France and Germany are the powerhouses of the Euro zone. There is a lot is at stake for both countries, as well as for the whole of Europe and, indeed, the world. They may implement decisions that hit weaker players, but they will certainly do their utmost to not let the Euro fail.
When is the right time?
It is possible to not only survive, but to thrive during a financial downturn; an economic crisis inevitably creates unique opportunities.
The “wait and see” approach has served many investors well over the last few years, but now may be the time to reconsider that strategy. The year 2012 could be the time to dive in to the real estate market. And as always, due to the law of supply and demand, quality properties in prime locations are considered a top investment choice.
Feature provided by Leading Luxury Real Estate