When It Comes To Investing Are You Like The Tortoise Or The Hare?

Most of you have probably heard the story of the tortoise and the hare. A hare and a tortoise were good friends - the hare boasted that he was able to move faster than the slow tortoise. One day the tortoise challenged his friend in a race. The confident hare decided to stop for a little rest because he knew he was much faster and was sure he would win, but the tortoise ran steadily, and won the race. The moral of the story is slow and steady wins the race. Well, it's a cute story but slow and steady doesn't always win the race when it comes to investing.

How about you, is your investment style like the tortoise, slow and steady? Do you invest in safe slow growing stocks and bonds and do you invest money that you have saved? Or is your investment style more like the hare? Do you invest in riskier stocks with potential high gains (or losses) and do you borrow money and invest it hedging your bets that you can earn more?

When it comes to being a real estate investor there is the incredibly slow path of saving money until you can pay cash to purchase an investment property, or the fast track in which you use the banks or private lenders money to leverage your buying power. Leveraging your money gives you the ability to purchase more properties (build wealth) much faster by using other peoples money. Which path is better really depends on what is going to happen with the US Dollar. If you take a look at the last few years, obviously the USD has not fared well. The USD isn't really money and hasn't been since we went off the gold standard in the early 1970's, it's currency backed by nothing. History has proven many times that fiat currency has a 100% failure rate. It typically fails in the form of moderate inflation, followed by hyper-inflation, until the currency is completely worthless. Let's say history repeats itself and the USD inflates at an extraordinary rate, will it be best to have all your debts paid off or be as far in debt as the lenders will allow?

My own opinion is that it's going to be best to be leveraged (aka the fast track). If moderate inflation continues, as each year passes you literally owe less on your properties. A $200,000 loan today will be like a $100,000 loan in 5 years if inflation presses on. If (or when) the USD goes into hyperinflation, a $200,000 loan could cost a couple cents to pay off in the future. On the other hand if the USD started deflating the exact opposite would happen. It would be much harder to pay off a loan because we would be earning less. Rents would go down along with other commodities. This would be very bad, and I would think that the best place to be in this situation is in a debt free position with properties.

So how likely is deflation to occur? There might be momentary blips; however, the entire arc of power in DC and Wall Street do not want deflation to occur. It's bad for government and it's bad for banks. Since the government and the banks have complete control over money supply, and therefore complete control over inflation/deflation it seems unlikely.

Inflation on the other hand seems extremely likely. Each dollar the Fed prints, and each new loan creates more fiat currency. Every dollar printed, slightly devalues all existing dollars. Since the government is running a huge deficit (the largest in history) now in the trillions, they have to print money faster than they are spending it to remain in business. So they are creating money faster than ever and inflation will adjust to compensate with some of the highest inflation we've ever seen in the USD.

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Dulcey is a member of Rentec Direct who provides Property Management Software, tenant ach payment processing, tenant credit check, and criminal reports for property managers and landlords.