Inflation is higher than it has been for decades and the euro is at a 20-year low. Is your portfolio in good shape?, says Rainer Zitelmann, a Berlin-based historian and sociologist. 

Every investor has to have an opinion about the future. Whether they are aware of it or not, every investment is based on forecasts. Of course, no one knows what the future might hold, but it makes sense to think in terms of the likely scenarios.

For example, 20 years ago, I recommended investments in residential real estate in Berlin. I also bought gold. Both were unpopular at the time. I bought gold for 10,000 to 14,000 euros a kilo; the price has now risen to about 55,000 euros. I have since sold most of my Berlin real estate assets - for at least four times as much as I initially paid.

So, I was rightly optimistic about residential real estate and gold, but I was pessimistic about the euro and also worried about inflation. Of course, I didn't know exactly when the euro would get into massive trouble or inflation would rear its ugly head. But for all of my investments I always think long term, which means in time frames of at least ten years. It is difficult or even impossible to predict market developments in the short term.

Think long term (10 years and more!)

In 2015, in my book Reich werden und bleiben (Get Rich and Stay Rich), I wrote that "the dollar will develop more positively than the euro in the long term." I explained my forecast as follows: "The combination of a far-reaching welfare state and negative demographic trends in Europe (in the U.S., it is exactly the opposite) does not speak in favour of the euro, nor does Europe's lower innovative potential.

Moreover, I do not believe in politically motivated, artificially ‘engineered' currencies. I have therefore decided to invest about a third of my money in U.S. dollars, mainly in U.S. real estate ... If you really think long term, you have a number of opportunities as an investor because the financial markets are dominated by traders who operate on very short investment horizons and are usually not interested in long-term developments - and even if they are, they are often not very good at assessing them."

Inflation-indexed bonds in your portfolio

I have bonds in my portfolio. Why? Because it doesn't make sense to be 100% invested in the stock or real estate markets. Yes, these are the markets that offer the highest returns, but you also have the greatest risk.

And they don't offer you the liquidity you need to pounce in the event of a crash. Buying in a crash is a good strategy. In March 2020, when stock markets plunged in response to the coronavirus crisis, I invested a significant amount in a global equity ETF.

I was only able to do so because I had sufficient liquidity. You have to park that liquidity somewhere. Of course, I would never think of lending several million to a bank - so a bank account is out of the question for me, at least for amounts in the millions.

I have parked my money in short-dated government bonds issued by countries with the best credit ratings (e.g. Germany, Austria, the U.S.). Short-term because the price risk of long-term bonds is too high for me. I have also invested in inflation-indexed bonds, i.e. bonds whose value is indexed to inflation.

Here's something else I wrote in my book Reich werden und bleiben: "One exception is inflation-indexed bonds, which have been available in Germany since 2006. These bonds have a lower interest rate, but offer protection against inflation.

Anyone who is worried that governments will attempt to reduce the scale of their debts via an inflation policy should buy inflation-indexed bonds.

As long as market participants dismiss inflation as an unrealistic prospect, these bonds are still available at a low price."

The latter is both the opportunity and the problem. Why? Because when you buy an inflation-indexed bond, certain inflation expectations are always priced in.

For example, when I wrote the following in 2015, an inflation expectation of 0.55% was priced into German inflation-indexed bonds.

As I explained at the time: "From the moment inflation rises above 0.55%, the investor with the inflation-indexed bond is better off than the investor who bet on a classic bond with no inflation protection."

I wrote those lines back in 2015. Of course, the situation is completely different now. But just a few months ago, I was buying inflation-indexed bonds with an inflation expectation of just 2% over the next four to five years priced in. I expected (and still expect) inflation to be higher than that over the next few years.

As you can imagine, I am very pleased that most of the bonds in my portfolio are inflation-indexed. Incidentally, I have rented out numerous apartments on leases that are also indexed to inflation.

Today, of course, inflation-indexed bonds are not as cheap as they once were. And I also advise against buying inflation-indexed bonds with a long duration (e.g. 10 years) because this is very risky if interest rates rise. On the other hand, an inflation-indexed bond with a residual term of one year is of no use to anyone, because inflation probably won't be over within just 12 months.

There is no ideal solution. I compromised and bought bonds with four to five years to maturity a few months ago. I'm usually a fan of ETFs, but only for stocks, not for these types of bonds. There are ETFs that invest in inflation-indexed bonds, but in most cases the maturities are too long, which leads to high price risks.

Europe is in decline

The cornerstones of my portfolio are of course not inflation-indexed bonds, but stocks and real estate, which I hold even in turbulent times. However, some years ago I switched some of my money from German to American real estate.

The main reason I held on to some of my German residential properties was because selling them before the end of the 10-year speculation period would have had negative tax implications. I also kept a number of individual apartments where I do not expect any loss in value.

Regarding US real estate: These have not been good investments for me in recent years. I have not lost money, but the value of the U.S. real estate fund in which I am invested has moved sideways. From a currency point of view, the decision was nevertheless the right one, because with every cent that the euro falls or the dollar rises, my assets increase (from a euro investor's point of view).

Moreover, I expect American real estate to outperform German real estate over the next few years. Germany - and Europe in general - is in decline. This is confirmed by a recent EY study: Whereas at the end of 2007, there were still seven German companies among the most valuable 100 in the world, at the end of 2021 there were only two.

In the first half of 2022, there were no longer any German companies in the top 100. Before the financial crisis at the end of 2007, 46 of the 100 most valuable companies in the world were European. The number of US companies among the 100 most valuable companies in the world in mid-2022 is 60.

In conclusion: Think in terms of the most likely scenarios and, above all, think long-term. Most of my investment decisions have only paid off after 5 to 15 years. If you don't have the patience, keep gambling - but that's not how you will get rich or stay rich.

By Rainer Zitelmann, a Berlin-based historian and sociologist. He is also an author, successful businessman and real estate investor. His most recent books include The Wealth Elite (, The Power of Capitalism (, and The Rich in Public Opinion : What We Think When We Think About Wealth (