While the stock market has remained relatively stable over the last few years, revenue is down for companies across a wide range of industries.
Spending has declined. Use of credit has increased. Delinquency rates have also been steadily rising.
By many measures, the warning signs of a weakening economy are becoming harder to ignore.
As a result, more investors are pulling capital out of securities they expect to become increasingly volatile in the coming years and reallocating it into tangible assets such as precious metals, real estate and industrial equipment.
These investors still expect appreciation over time, often despite or because of a soft economy.
The primary motivation, however, is risk reduction and inflation protection. Tangible assets tend to be significantly less volatile than securities, particularly during periods of economic uncertainty.
Tangible assets provide stability and an inflation hedge
Securities can act as an inflation hedge during periods of economic stability.
That relationship often weakens when the economy softens, as it has in recent years.
When demand slows, companies across many industries struggle. Stock performance can lag inflation as a result.
Tangible assets do not eliminate this risk, but they are generally less exposed to it because they carry intrinsic value.
That intrinsic value tends to support more stable pricing over time.
Gold is one example. It has industrial uses in printed circuit boards, solar panels, satellite shielding and jewelry.
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Real estate holds value both because of the materials required to build it and because people consistently need housing and commercial space.
Properties can generate rental income while continuing to appreciate.
Certain vehicles and machinery also fall into this category, particularly when they can be used to produce revenue.
A tow truck, printing press or excavator can be an effective investment under the right circumstances.
These assets often retain value and may generate income.
Over time, the intrinsic value of these assets tends to rise as inflation erodes the purchasing power of the U.S. dollar.
The cost of goods, materials and equipment increases. That is why the price of homes, gold and industrial equipment generally trends upward over long periods.
This dynamic does not apply to depreciating assets such as personal vehicles, which typically lose value over time.
Carol Roth, economic expert and author of You Will Own Nothing, noted that, “The shifting global financial order is also supportive of the gold thesis.
Central banks worldwide are leaning into gold as a critical component of their reserves.
In fact, central banks have been net sellers of U.S. Treasury securities over the past decade or so and instead of replacing them with another currency, they have been replacing them with gold.”
There is a learning curve
Investing in tangible assets such as precious metals and real estate offers meaningful advantages, but it is more complex than investing in securities.
Most investors can open a brokerage account and begin trading stocks quickly. Tangible assets require more time, diligence and operational effort.
With precious metals, investors must identify reputable vendors, track spot prices and market conditions, complete purchases and arrange secure storage.
Platinum and gold concentrate high value in a small physical footprint. Silver requires more space due to its lower relative value, which is an important consideration.
Vendor selection is critical. Counterfeit precious metals are widely sold, often by overseas sellers. Inexperienced investors may struggle to detect fakes.
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Some counterfeits use alloys that closely resemble authentic metals. Others contain a cheap metal core coated with a thin outer layer of the real material.
Real estate investing presents its own learning curve. Investors must understand market dynamics, construction fundamentals, zoning rules and legal requirements.
Building a reliable network of appraisers, lenders, brokers, attorneys and contractors is essential for executing transactions efficiently and protecting assets.
That process takes time. Contacts must be identified, vetted and tested. Availability constraints also mean investors need backup options when deals move quickly.
Veteran real estate investor Tatiana Zagorovski described how early missteps shaped her approach.
“When I first got started in real estate, I took people at face value and that led to me getting conned out of over $100,000 on my first deal. But I picked myself back up, dusted myself off and took a different approach to building my network.
As former President Ronald Reagan once famously said, ‘Trust, but verify,’ so that’s exactly what I did.
I vetted each new contact with a healthy level of skepticism, documented the terms of our agreements more rigorously and doled out trust far more slowly and carefully.
That eventually led to me meeting my current mentor and the wisdom he’s shared with me has propelled my success farther and faster than I could have ever achieved on my own.
Along the way, I’ve built a broad network of experts across virtually every aspect of real estate who I can rely on to complete transactions quickly and profitably,” Zagorovski said.
Liquidity presents unique challenges
Despite their advantages, tangible assets share one common drawback: liquidity.
Selling tangible assets is typically slower and more complex than selling stocks, bonds or certificates of deposit.
Investors must carefully consider their short-term cash needs. Liquidity timelines vary by asset type and market conditions.
Precious metals can usually be sold quickly due to deep global markets.
Vehicles and industrial equipment often take longer to sell because buyers must have a specific operational need. Geographic proximity matters. Shipping costs can materially affect returns.
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Real estate is generally the least liquid. Sales depend on local demand and may involve zoning or regulatory hurdles.
Investors considering tangible assets should carefully evaluate their short-term cash requirements.
Becoming asset-rich but cash-constrained can create operational risk, particularly in a soft economy.
The challenge is balance. Protect capital. Maintain sufficient liquidity. Preserve flexibility to pursue new opportunities as they arise.
