Grant Cardone Reveals How His 5.5% Returns Are Actually Costing Him Money – Why He Says You're Still Losing Money

Grant Cardone, the well-known real estate mogul, recently revealed a hard truth about his finances that might surprise some. Despite earning returns of 5.5%, he claims he’s losing money. How is this possible? In a candid interview with VladTV, Cardone said it all comes down to taxes and inflation.

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He explained how a large portion of his fortune – around $500 million – has been sitting in a sweep account at a bank. That money is essentially his “dry powder,” a reserve he's holding onto for future real estate deals. But while the cash waits, it's steadily losing its value. Cardone admitted, "I didn't keep up with the hammering," referring to how inflation and taxes have eroded the worth of his savings.

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Earning 5.5% may sound decent, but it's far from a win for Cardone. “I don't want 5% on my money,” he said. After taxes, the returns shrink significantly. "That's all taxed at my rate," he pointed out, meaning that after the government takes its slice, his real return is closer to 2.7%. That's the problem – those earnings aren’t enough to keep up with inflation. He said bluntly, "I'm actually losing money by keeping it there."

Inflation in the U.S. has been creeping up, averaging about 3% annually. So even if Cardone's cash earns 5.5%, by the time taxes and inflation have their say, he’s coming out on the losing end. 

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And Cardone's not alone. Even financial heavyweights like Warren Buffett face the same dilemma. Buffett reportedly holds an eye-popping $189 billion in cash and it's all losing purchasing power thanks to inflation.

Buffett has spoken about this, calling inflation a "far more devastating tax" than any formal legislation. And he’s not wrong. Inflation quietly eats away at wealth and it’s something that all investors – whether mega-rich or just starting – have to grapple with. So, how do some of the savviest investors fight against this invisible tax?

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For Cardone, the answer has always been real estate. It’s no secret that real estate tends to hold its value, even when inflation rises. Property prices and rent are tied to the cost of living, which means when everything else gets more expensive, real estate does, too. 

Analysis from Avison Young shows a clear link between real estate returns and inflation, especially when properties are held long-term. For investors, this is a way to maintain wealth while inflation is at its worst.

Buffett, on the other hand, prefers to bet on strong companies. He argues that solid businesses with pricing power can simply raise their prices in line with inflation, passing the cost on to customers. The numbers seem to back him up. 

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According to Charlie Billelo of Creative Planning, the S&P 500 – adjusted for inflation – has delivered an impressive 840% return since 1994. Over that same time, the value of the U.S. dollar dropped by over 50%.

Then there's gold. It's long been seen as a hedge against inflation, with central banks worldwide holding precious metal reserves to maintain stability. Some investors, like billionaire Ray Dalio, turn to gold when worried about rising inflation and government debt. But not everyone's sold on gold's role as an inflation hedge. 

A Reuters study found that only 16% of gold's price movements since 1971 are linked to inflation and some experts argue that its inflation-adjusted value has fallen since 1980.

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