Are we heading for inflation? What about deflation
? Are you unsure? A lot of people are so it is becoming difficult to know where to put your money. In an environment like this I believe that you should consider alternative investments. No one can be sure of what is to come but we can do our best to prepare for it.
If we do see deflation then it is a good idea to hold cash. In deflationary times cash actually increases in value. This is one of the reasons that policy makers don't like deflation. People hoard money. They don't spend it because things will be cheaper in the future and as a result the economy seizes up.
So is cash better than alternative investments in deflation? The answer is maybe. While we might see deflation in the 'real' economy, policy makes are doing their best to avoid it. They are doing that by printing lots of money. This money might not reach Main Street but it does reach Wall Street. They then search for greater returns and may look towards alternative investments to find them.
The problem with keeping hold of cash is that we might not see deflation. Inflation can take off very quickly and in a scenario like this, cash is one of the worst places you want to be. Alternative investments can be a way of hedging that.
Values in alternative investments, such as wine and antiques, aren't very correlated to fluctuations in the stock market. This allows you to diversify more and given that a lot of people have a lot of wealth tied up in equities this is not necessarily a bad thing.
No matter what people tell you, they can't predict the future with any great certainty. You have to do your best to filter out the noise and choose investments based upon probabilities. With that in mind you should consider alternative investments.