Inflation Can Create Losses in an Investor’s Portfolio

Inflation occurs when the general price of the goods and services rise and, as a result of the increase in cost, the purchasing power of money decreases. The obvious consequence, or effect, of this is that inflation makes it more difficult for people to afford the basic necessities of life if their income is not able to keep pace with the inflation rate. This can also create losses in an investor’s portfolio if their investments are not earning at least as much as the rate of inflation.

The rate of inflation is important as it represents the rate at which the real value of an investment is eroded and the loss in spending power over time. Inflation also tells investors exactly how much of a return their investments need to make for them to maintain their standard of living.

For investors, a high inflation rate has historically been considered anything over the 3% to 4% annual range. In the last decade, the United States has experienced historically low interest rates. This can be attributed to the unprecedented intervention by the Federal Reserve and U.S. lawmakers to avoid the collapse of the global economic system in 2007, 2008, and 2009.

Central banks rely on the relationship between inflation and interest rates. If interest rates are low, companies and individuals can borrow money cheaply to launch a business, earn a degree, hire more workers, or buy a new car. In other words, low interest rates encourage spending and investing, which in turn generally stokes inflation.

During periods when the price of goods and services are increasing, the uncertainty caused by the rising inflation may discourage people from investing. This is especially true for people investing in bonds. Inflation is a bond’s worst enemy; it erodes the value of the investment’s return. Investors can protect their purchasing power and investment returns over the long-term by investing in hard assets that generate an income, such as an investment in shipping containers.

When it comes to inflation, whether you have buried your money in the backyard or it is sitting in the safest bank in the world, it is becoming less valuable with the passing of time. With this idea in mind, investors should try to invest in opportunities that can deliver returns that are equal to or greater than inflation.

Shipping Containers Top List of Income-Generating Investments

A growing number of investors are seeking investments that will put their money to work and generate a stream of residual income. Most are looking for an investment opportunity that can supplement a fixed-income, like a disability or retirement. Regardless of the motivation, the demand for income-producing investments is rising.

At the top of the list of income-generating investments is shipping container investing. This is an investment in a hard, tangible asset that is used globally to facilitate trade. Different types of shipping containers can be found working on trains, trucks, and ships, all around the world.

With the help of a container investment and leasing company, investors can own a fleet of hard-working cargo containers and earn a monthly income for themselves. The shipping containers purchased by investors are deployed by the leasing company on busy trade routes between the continents and shipping ports of the world. Employed by shipping industry leaders to meet the import and export demands of countries around the globe, these cargo containers spend years crossing the world’s oceans and seas.

The expected lifespan of a new shipping container is more than a decade. So, an investment in shipping containers could deliver monthly returns for 10+ years! This time period, and associated risk, is comparable to an investment in a Treasury bond. The thing that differs most between the two is the rate of return. Shipping container investments generally pay between 10 percent and 15 percent for the duration of the agreement, whereas a bond will yield approximately two percent over the same time frame. Moreover, investing in shipping containers provides a monthly return in the form of lease income; bonds do not.

Despite increasing talk of protectionism in the United States, other economic giants – like China and India, the U.K, Canada, and the European Union – are moving ahead with free trade deals that remove many of the tariffs and taxes that impede economic growth. Over the next half-a-century this will create a rising demand for shipping containers to transport cargo to emerging markets and developed countries alike. Count on this to produce a dependable, long-term income for container investors.

My Investment in Shipping Containers With Davenport Laroche

With the stock market rising to record highs, my fears of a bubble-burst were growing. So, I sold a majority of my stock holdings and invested my profits (not principle) in an alternative investment; shipping containers. Yes, the giant steel boxes you see on ships, trains, and trucks.

My decision to seek an alternative to traditional-type investments came after I considered options like bonds, gold, and real estate. In most instances, those would be my go-to three. Not this time. With interest rates set to rise, the bond market seemed like a risky investment. Gold has been a poor performer and a disappointment for years. And, the real estate market is challenging and subject to political influence; take Brexit for instance. Because of these reasons, none of the usual investments interested me.

Shipping containers, on the other hand, are the workhorse of the global economy. I recently discovered that more than 90% of the world’s trade is moved by the container shipping industry. If countries around the world want to increase their GDP, they’ll need a lot of cargo containers to do it! Consider for a moment the economic potential of China and India alone.

To purchase and lease my three shipping containers I enlisted the help of Davenport Laroche. They are a container leasing company based out of Hong Kong, one of the world’s largest shipping centers. In fact, in 2016 there were nearly 20 million containers moved through the port of Hong Kong. This performance has placed it number five on the list of Top 50 Container Ports in the world.

The kind representative from Davenport Laroche helped me better understand the outlook for the container industry and explained the rising demand for shipping containers, particularly in Asia. She explained to me that with China’s introduction of their One Belt, One Road initiative, container traffic in Asia and Europe is expected to rise significantly, over the next decade. The containers purchased from Davenport Laroche will be participating in, and profiting from, this strong Eurasian growth. Factor in the 12% annual return on investment and a container lifetime of more than 10 years and you have a residual income for more than a decade.

Certainly there are other container leasing companies that offer opportunities similar to Davenport Laroche. However, some investors had a good experience investing with another company, while others questioned whether the whole thing was a scam or not. I decided against the other companies and instead choose Davenport Laroche because of their pristine record and transparency.