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How to invest in a deflationary environment?

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  1. #1

    Join Date
    Oct 2018
    Posts
    263

    How to invest in a deflationary environment?

    I think deflation is more likely than high inflation. How should one invest in a deflationary environment? I think there are periods of deflation in the last 50 years, so there are few examples.

    Housing doesn't seem to be the best investment, even though the low interest rates might result in higher property prices in the short-medium term (not in HK).

    An interesting article I found on the topic is:

    https://contrarianedge.com/how-inves...article_inline

    Last edited by john_1122; 01-07-2020 at 01:01 PM.

  2. #2

    Join Date
    Dec 2018
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    1,248

    If you believe we are heading for a period of prolonged deflation, the first thing thing I'd be buying (after paying down my mortgages) would be long dated investment grade bonds. Unfortunately they are very expensive and, if you are wrong about deflation, could be a good way to lose a lot of money.

    Another way to consider the question is to ask how central banks will respond to deflation. Using Japan as an example, they will keep creating new money and injecting it into the economy – wherever that flood of new money will end up is where you want to be.

    john_1122 likes this.

  3. #3

    Join Date
    Nov 2005
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    Cramped island
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    but if they continue to print money and the money goes somewhere, then its no longer deflationary. haha..
    this has been the million dollar question in the last 20 years.. nobody can find that answer..

    i think a barbell approach might be best.. two extreme end.. safest (cash, gold) and riskiest (equities, whatever else) asset 50-50...

    john_1122 likes this.