Summary: In this article, RealWealth® Co-CEO Rich Fettke shares his views on the best places to invest money right now (in the Coronavirus Age). Learn about financial tips to protect yourself during these tough times as well as potential deals for investors.
What Are the Best Places to Invest Money Today?
With the outbreak of the Coronavirus pandemic sweeping the globe, many of us are asking: where are the best places to invest money right now? It’s a tough question to answer given that we have never been in this situation before. The entire world is about to go on a “time-out”. Even if there is a cure soon, and life returns to relatively normal, things may never return to exactly the way they were. And some even believe the air has come out of the bubble and that we are most likely headed for recession.
In my opinion, the best places to invest or keep your money right now due to Coronavirus are in (1) gold and silver, (2) cash in a safe in your home, (3) a maximum of $250,000 in FDIC insured banks, (4) Bet against commercial lending, (5) farmland, (6) affordable rental properties, or (7) paying off your home. I’ll also talk about helpful financial tips during these tough times.
Here are 7 of the best places to invest money right now… in the age of Coronavirus.
#1 - Gold and/or Silver
I recommend that you invest about 10% of your net worth in gold or silver. The reason for owning gold or silver, is that it acts as an insurance policy. That is, actual, physical gold, not ETFs. It’s best practice to keep your gold and silver in a safe storage by a reputable company. It’s also a good idea to keep some physical gold in your own safe at home for worst case scenarios.
If the market crashes and all other stocks are lost, gold should follow historical trends and go up, or at least hold most of its value. Gold is a great way to protect yourself from losing everything during these times of uncertainty.
A few recommendations for how to buy gold:
- For storage Kathy and I use: https://hardassetsalliance.com/
- For delivery of physical gold and silver we use: https://www.jmbullion.com/
But there are several options out there as well. These are just the ones that I’ve researched and found are best for our needs.
#2 - Cash
You should also have a good amount of cash on-hand. I’d suggest that you keep around 10% of your net worth in a safe box at home. This might seem like an outrageous amount to some, but we’re in uncertain territory here. The closest thing to the Coronavirus pandemic we’ve seen is the Great Recession of 2008. And back then when everything in the finance world was in disarray, allegedly banks were just hours away from freezing all accounts temporarily in which case no one would have access to their money. In fact, this is exactly what happened in Greece when their economy crashed, causing bankruptcy.
Just last week, I visited a bank to withdraw a larger sum of money. They told me the most I could withdraw was $5,000! That’s why having cash in a safe at home is a great insurance policy in case this happens. Plus, since banks pay almost zero interest, it’s not like you would be missing out on all those interest payments.
#3 - FDIC Insured Banks & Accounts
Spread your money out in smaller amounts in FDIC insured banks. Never put more than $250,000 in any one bank, because the FDIC will only insure “$250,000 per depositor, per insured bank, for each account ownership category.”
What the FDIC Covers
- Checking accounts
- Negotiable Order of Withdrawal (NOW) accounts
- Savings accounts
- Money market deposit accounts (MMDA)
- Time deposits such as certificates of deposit (CDs)
- Cashier’s checks, money orders, and other official items issued by a bank
What the FDIC Does Not Cover
- Stock investments
- Bond investments
- Mutual funds
- Life insurance policies
- Municipal securities
- Safe deposit boxes or their contents
- U.S. Treasury bills, bonds or notes*
*These investments are backed by the full faith and credit of the U.S. government.” [Source: FDIC.gov]
However, it’s important to note that FDIC insurance may change if COVID-19 leads to a complete financial meltdown…
In the past, during dire circumstances, the government has adjusted how much the FDIC would insure. If our national economy continues to decline with the outbreak of Coronavirus, there is a small chance the government could change how much they will insure, or how they will insure it.
Your best bet is to have your money in big banks (like U.S. Bank & TD Ameritrade), because they have tons of capital. In fact, recently the Fed stated that big banks have $2.9 trillion in high quality liquid assets, plus $1.3 trillion in common equity.
Since the Great Recession of 2008, regulatory minimums and buffers of capital and liquidity have been raised substantially. According to the Fed, “These capital and liquidity buffers are designed to support the economy in adverse situations and allow banks to continue to serve households and businesses.” In recent days, the Federal Reserve has launched unlimited QE in order to keep the banks liquid in these uncertain times. They have also lowered reserve requirements.
Financial expert and writer, Harry Dent suggested looking into a brokerage account at Ameritrade.
#4 - Bet Against Commercial Lending
Many investing experts are saying the U.S. commercial real estate market is going to implode, much like the housing market did in 2008
In an effort to contain the spread of the Coronavirus Pandemic, many conferences and events have been cancelled or postponed indefinitely, affecting the U.S. lodging, travel and tourism sectors. Additionally, closures of retail centers, restaurants, and office buildings has become widespread.
Because of this, commercial real estate may be in big trouble. Billionaire investor Carl Icahn explained that the 2008 housing market bubble is happening all over again because of loans made to shopping malls and other retail centers in 2012.
Many banks sold mortgages on commercial real estate, and “when they did those mortgages, [the banks] sliced and diced them and put them in something called a ‘CMBX,’ an index.” They then sold their clients bonds against these mortgages.
According to Icahn, the reason COVID-19 makes this such a big issue is because commercial real estate will likely default on these loans due to their recent closers.
Consequently, “[a] lot of these bonds now are in grave danger…it’s like selling insurance to someone who’s going to go to the electric chair in a couple of months.”
Icahn also believes (and I agree) that while the Coronavirus may have catalyzed the market’s initial drop, it still has a lot farther to fall.
Long story short: now is not the time to invest in commercial real estate. It’s the time to bet against it. One way to do this is to invest in Inverse Real Estate ETFs.
#5 - Farmland
A recent report by Hancock Natural Resource Group showed that there will be widespread economic consequences from the Coronavirus. However, with the constant demand for food, agriculture commodities are expected to remain more stable than others.
Our company owns 800 acres of farmland in Costa Rica where we planted over 10,000 fruit trees and a fully operational farm based on cutting edge permaculture practices. We are also building a residential community for people who prefer to live near the food they grow, with clean air and plenty of fresh water streams and waterfalls. For more information, you can visit www.RiseCostaRica.com or join our network for more information on how to own your own parcel of farmland.
A few more ways to invest in farmland:
- AcreTrader (An online platform that allows you to purchase shares in farmland)
- Farming Equities (Crop Producers, Seed Equities, etc.)
- Commodities (ie: Soybeans or Corn)
- Farming Mutual Funds & ETFs
- Farming REITs
#6 - Rental Properties
Due to the Coronavirus, more and more people are rethinking how they would like to live. For example, being cooped up in a New York City apartment during a quarantine is less than desirable.
Demand for single family homes appears to be increasing as city residents move out to the suburbs in order to have more space and back yards. There’s also still a huge lack of supply in the affordable housing market.
Generally during challenging times, more people are forced to rent, which could offer a great opportunity for investors looking for rental income from single family homes.
If you have money saved up already, now might be the perfect opportunity to buy a rental property for the following reasons:
- Rental demand for single family homes could increase, along with rents
- Interest rates remain low (3.88% interest on a 30-year fixed rate)
- There’s not a huge amount of competition because many people are afraid to invest right now
While I don’t expect mortgage interest rates to drop below record lows in the next couple of months, there’s a good possibility they will continue to remain low.
Because a lot of people are hesitant to invest right now, this may be a great time to buy a rental property on the cheap and turn it into a cash flowing investment.
Investor tip: Look to attract higher net worth tenants who will pay several months in advance for added security.
#7 – Pay Off Your Home
Another option is to take your cash and pay off your home. The three percent interest you will no longer be paying may be a great option. But, only do this if you won’t have to pour all of your cash into paying off your mortgage right now as you’ll become more vulnerable during these times of financial unknowns.
If there is any chance of job loss, it might be more prudent to refinance your home and take cash out to set aside for reserves.
More Financial Tips for These Tough Times
Move To More Affordable Places & Hunker Down
For those who have a nest egg and have lost your job, consider moving to more affordable places and hunker down. It’s possible for many people to buy a house outright in more affordable places.
For example, an A class property in a A+ school district in Cleveland, Ohio may cost less than $150,000. And if you prefer warmer weather, you might find a B+ home in Dallas, Houston, Atlanta, Tampa or Jacksonville, Florida for under $200,000.
Have Some Liquidity
One of the best financial strategies during this period of fear, panic, and volatility is to stay as liquid as possible–while using good judgment. By having physical cash, it doesn’t matter what the banks do. You would still have YOUR cash in YOUR hands and it would be ready to go in case you really needed cash for any reason.
What to Do Next?
Many of the best places to invest money right now have shifted, just in the last two weeks. Keep in mind that there could be a lot of deals in commercial real estate over the next couple of years if we head into a global recession. Keeping some cash in hand for opportunity is always a good idea. The commercial market, along with stocks, have finally corrected, which like it or not, was much needed. The strongest companies will rise to the top. The question is, which companies? We will keep our eyes on how it unfolds and share it with you.
In 2021, the economy has already changed rapidly and will continue to change as we face the impacts of the COVID-19 pandemic. At RealWealth®, we help investors acquire affordable rental housing that provides positive monthly cash flow. No matter what the economy is like, people still need a place to live.
With that said, I would probably short commercial lending, as it will be headed for difficult times ahead.