How to save money from inflation in a crisis: deposit or real estate in Dubai?
During the economic crisis, investors are looking for different ways to keep their funds from depreciating. In February and early March 2022, the whole world watched the devaluation of the ruble, which sharply lost weight against major currencies. Inflation in Russia reached 17.6% in April, and according to economists’ forecasts, the annual figure could reach 18-23%.
In the current conditions, investment analysts recommend various ways of where to invest money so as not to lose it later. Let’s see which of the options really make sense to consider, and which are fraught with problems.
- What can happen to savings: what to invest rubles in so as not to lose?
- Disadvantages of investment
- Bank deposits: will savings accounts, deposits and buying precious metals and jewelry help against inflation?
- New business in times of crisis
- Should you invest your savings in real estate in Dubai now?
Many are wondering how to save money during the financial crisis of 2022. After some Russian banks were cut off from the global financial system due to sanctions imposed by the US and the EU, some clients preferred to withdraw their savings from their accounts and keep them at home. On the one hand, such a step is not devoid of logic: in this way, money is physically under control. But on the other hand, the already mentioned inflation or devaluation can significantly reduce the amount you have. In other words, having money at hand is not a guarantee of their safety. If you keep savings only in cash, they will depreciate. The economic crisis threatening Russia and the whole world only strengthens these frightening prospects. Therefore, the question of where to invest money, so as not to lose, should be carefully studied.
One of the ways of financial protection is considered to be investments in securities and playing on the stock exchange. Traders claim that by being able to anticipate ups and downs and navigate the market, one can consistently profit from stock manipulation. For those who do not understand the intricacies of the exchange, professional brokers are always ready to help.
However, even the most experienced broker is not immune from failure. Proof of this are the events of 2022: after drastic changes in the political arena, the indices of all the world’s largest exchanges collapsed, including Nasdaq, FTSE, SNP, SSE, etc., and many companies went bankrupt.
China, a landmark for IPOs of large enterprises, has tightened the regulatory screws in recent years, forcing companies to cancel their listings. Back in 2020, due to political repression, the largest IPO in the history of fintech Ant Group, a subsidiary of Alibaba holding, did not take place. The total amount of applications amounted to 3 trillion $ (more than 20 trillion ¥). The reason for the cancellation of such an expected placement was the tightening of control over the IT market of the Middle Kingdom, as well as critical statements about the Government of the country of the founder of the empire, businessman Jack Ma. Since then, the company has lost about $620 billion (¥4.1 trillion) of market value.
The main problem of investing in stocks and securities is the unpredictability of the result. Those whose youth and maturity came at the end of the 1990s remember the default, when millions of Russian families lost at once all their savings invested in government short-term bonds. Not a single enterprise, even the largest and most in demand, is immune from collapse. Thus, there is no guarantee that your money is relatively safe – it may turn out that it will be too difficult to make up for the losses. It is impossible not to expose yourself to risks when investing, so in order to avoid problems, it is better not to try to save money in this way.
How to save money during a default in Russia and what to do with savings during a crisis? Despite the fact that this scenario has not yet been developed, many are already concerned about this issue and are looking for ways to protect their assets.
Some people find it safe to keep money in a bank account. This step is not devoid of logic, especially if you put them not in a savings account, but in a savings account. The constant receipt of interest from the deposit will help to avoid depreciation and increase savings. But this solution has three drawbacks.
At the beginning of 2021, tax legislation changed in Russia. Now those who have more than 1 million ₽ (16 thousand $, 106.7 thousand ¥) in their account and whose total interest income on deposits exceeds 42.5 thousand ₽ (680 $, 4.5 thousand ¥), forced to pay personal income tax at a rate of 13%. But even if the money is in a savings account, they are subject to a certain risk. The point is that the maximum The current insured amount of the bank deposit is ₽1.4 million ($22.3 thousand, ¥149.3 thousand). In other words, if you have deposited with a credit institution an amount exceeding this threshold, in the event of a bank failure for any reason, this is the maximum compensation that you can count on. In connection with recent political events and harsh sanctions that a number of Russian creditors fell under, the version of bankruptcy due to the inability to fulfill obligations to counterparties no longer seems so unrealistic. Another problem could be holding money in a foreign currency, which seems more stable to some, which can lead to problems with their withdrawal, as already happened in the spring of 2022.
Some lenders today offer clients to purchase gold and thus “freeze” the deposit. On the one hand, gold is an effective “defensive” asset that many analysts recommend during periods of instability. In the long run, it allows you not to lose money and even increase it, as the price of the precious metal is constantly growing. On the other hand, there is the question of marketing. Banks undertake to take back from you the coins or bars that you purchase from them. But, firstly, the bank, as mentioned above, may go bankrupt, and secondly, the buying rate is not equal to the selling rate. In other words, if you decide to return your money in a short time, you will lose on the difference in the indices. Investments in less obvious assets, such as jewelry, cannot be considered stable: they can be difficult to sell later, and the price is likely to be significantly lower than the purchase price.
For some, a logical step in solving financial problems is the opening of their own enterprise. It seems to novice businessmen that right now is the time for change and serious action, and the market needs something new that will definitely be successful. Analysts do not share this optimism: according to them, periods of crisis, with rare exceptions, do not contribute to the prosperity of companies. There are several reasons: firstly, there is a sterilization of the money supply, that is, the Central Bank withdraws part of the money from the economy. This is necessary to support credit institutions from which customers have withdrawn their savings. Thus, some social sectors receive less assistance. Secondly, during a crisis, purchasing power decreases: the income of many families decreases and there are fewer free funds. Thirdly, the craving for purchases is also weakening – the uncertainty in the present and the vague prospects for the future keep citizens from additional spending. In this situation, it becomes difficult even for existing enterprises to survive, and newly opened ones may not survive even due to the novelty effect.
Amid worries about how to protect themselves from inflation, some investors are turning to such an option as buying a home. When asked what is good about investing in real estate, experts answer: “Everyone”.
- Even during the most massive economic shocks, nothing will happen to housing. It may fall in price for a while due to market volatility, but then its value still grows. In addition, it is a reliable asset that can be used for its intended purpose, that is, as living space.
- With a successful and reasonable choice of real estate, it will not only not lose in price, but will also rise in price. To buy investment property, you should turn to professionals who will help you make the right choice.
- Property can be resold at any time. Unlike gold, securities and other investment options, apartments and houses will retain their liquidity and will always be in demand.
- This asset can also bring passive income: it makes sense to rent out the object. You can spend the funds received, pay a mortgage with them or invest in another similar project.
One of the most reliable ways to invest in residential properties is investment in real estate in Dubai. The emirate has shown an enviable rise, with 84,196 transactions worth almost AED 300 billion ($81.6 billion, ¥518 billion) in 2021 compared to 35.4 thousand transactions worth AED 72.47 billion (19 .7 billion $, 132.1 billion ¥) a year earlier. Getting income from investing in real estate in Dubai is very simple – the object can be rented out both for short-term and long-term lease. In the first case, the profit will be 11‒13% per year, in the second – 4‒7%.
The advantages of buying real estate in Dubai are obvious: inflation, which is growing at a record pace in Russia, has not exceeded 3% in the emirate since 2016. At the same time, the growth in real estate prices in the last year alone amounted to 43.2%. In addition, the emirate adapts to new global trends and allows you to purchase housing even in these difficult times: for example, even those affected by the freezing of investment assets and capital, new owners of real estate in terms of sanctions. One of the ways to buy in a situation where many banks have come under restrictive measures from the US and Europe is cryptocurrency.
Many local developers are already working with bitcoins and other digital currencies, which makes it possible to purchase both ready-made and under-construction housing on comfortable terms. At the same time, cryptocurrency and sanctions circumvention is the easiest way to withdraw money abroad today, when the limit for the transfer of assets is $10,000 (more than ¥66,000) in any equivalent.
Another argument in favor of buying a home in Dubai is the rising cost of energy. The UAE, while maintaining political neutrality, remains an oil exporting state. In other words, a person who lives in the Emirates or has real estate here has every chance of getting rich, because this country will become even richer, which will affect the quality of life of all its citizens and residents.
Employees of Ax Capital real estate agency in Dubai will tell you about how not to lose money during inflation and how it is profitable to invest it in real estate. They will explain in detail how you can invest the accumulated funds and help you choose the most suitable option from those on the market. You can contact the experts at the phone number listed on the site.