A NUMBER of investments, such as real estate, gold and oil, are historically viewed as hedges against inflation.
For investors, the key to making money in an inflationary environment is to hold investments that increase in value at a rate higher than inflation.
Datuk Seri Mahadi BZ, a chartered master trainer and partner at Lawrence Walter Seminars, said real estate is a popular investment choice as its value normally increases over time and it generates recurring rental income.
“(Real estate) investment is really good... yet it can turn bad if we do it without knowledge but based on emotions, because it’s all about strategy and passion.
“When purchasing a property for the best financial returns, a choice must be made between buying a commercial or residential property,” said Mahadi, who made his first RM1 million from investments at the age of 21.
He said although there was no right or wrong choice, commercial properties tend to have a higher rental return compared to residential ones.
“A commer-cial tenant pays all outgoings including rates whereas a residential tenant only pays the rent. The rental period for a commercial property is often at least three years while a residential rental period tends to be less,” he said.
Mahadi said real estate investors must know when to exit the market, adding that the best time to do it is when market value is greater than intrinsic value.
He advised investors not to rush to sell but, at the same time, not to hold for too long because prices could fall amid weak market conditions.
“Unfortunately, most people are forced to sell at the wrong time, when market value is less than intrinsic value due to changes in their personal circumstances such as losing jobs, or external factors such as rising interest rates,” he added.