People love to remember the good old days — the time when something you bought lasted, when a new house and car meant you achieved the American Dream and when financial planning was fairly simple. Today, Americans are looking at online account statements and portfolio summaries and wondering where all the “real” assets have gone. As throwback names like Evelyn and Isabelle are making a comeback, so too are old-school investments.
For the past few decades, everyday investors have overlooked some of the oldest, profitable investments on earth: energy, farmland, gold and real estate. Classify these investments as “real” assets. Real assets’ value is not found on a monthly statement in the mailbox, it has value that can be touched, visited and used.
We’ve become a paperless society with business transactions moving at the speed of light. Anyone with an online brokerage account can click their mouse and invest within seconds. Why forego these modern efficiencies? Because 2008’s housing market collapse created financial turmoil, and the paper assets lost significant value in a flash. Some people lost nearly half of their net worth over the course of a few months and they don’t want it to happen again.
People always talk about the safety of putting money under their mattress. It’s a funny concept, with the sophistication of today’s banking system, but people still do it. They must sleep better knowing they have their hard-earned dollars right where they can get them, whenever they want. Truly having possession and ownership of something is more comforting than a printed-out account statement. In the past, wealth was defined by how many acres you owned or the material assets you possessed — like 20 dairy cattle or a box of fine jewels. Today, owning gold coins is much more satisfying than owning shares of a gold ETF in a stock portfolio. Even though they might have to fix a toilet for a tenant at 3 a.m., some people would rather own rental properties than a REIT (Real Estate Investment Trust) through a broker. They can visit that property and know it is theirs.
Mattress savings accounts have no chance for upside or gain, but the concept is on the right track. Some of the hottest investments out there today are wealth-preserving real assets. Gold investing has been in the headlines for years. Groups of friends are getting together to purchase homes to rent out as landlords, bringing good cash flow. Lexington is actually surrounded by acres and acres of a real asset that is gaining some steam and outperforming many sectors —cropland. Commodities are going up in price and smart people are cashing in with inflation-protected real assets, investments that tend to increase in value when prices go up.
Today’s investors aren’t greedy. They happily give up the promise of big returns to have safety in their portfolio. People are scared about what happened to the market a few years ago, and they’ve heard stories of past financial turmoil. If everyone wants their money at the same time, scary things happen.
Investors should get back to the basics, and accumulate some real assets in their portfolios. They’ll rest easy knowing where their investment really is, and possibly get higher returns. Buying a “real” asset can bring great satisfaction and comfort, and it will probably bring back the feelings of the good ol’ days when there was tangible wealth and prosperity.
My grandfather, a traveling salesman, decided to purchase a piece of commercial rental land in his forties. He was not a rich man, and while he still had stocks and bonds, he knew he had to offer something “real” for his family. Every month, my grandmother, now 90, receives a check from the tenant that rents my grandfather’s land. His smart, real investment has provided his family and my grandmother with a great income and a sense of security; it always has and always will.
Brian Luftman is a Lexington native and Bluegrass returnee, and founder of the company American Farm Investors (www.AmericanFarmInvestors.com).