There are many factors that affect the value of your returns as an investor, one of which is inflation. Investing your money strategically during periods of inflation can help you keep your purchasing power up even as prices increase.
Keep reading to learn more about the investments you should be making to combat the effects of high inflation.
Why Should You Invest During a High Inflation Period?
When inflation rises, the prices of goods and services start increasing over a period of time. This reduces the power of the dollar and can have a negative impact on both the money you have saved in a bank and the returns you receive from investments.
In times of high inflation, many investors wonder whether they should change their investment strategy and alter their portfolios, which is why we’ve prepared a short list of assets that can be beneficial within an inflationary environment.
Best Investments To Protect You Against Inflation
If your investment goals revolve around long-term gains and if you are counting on your investments to fund things like retirement, you will want to make inflation protection a priority.
One way to do this is by making investments that hedge against inflation, meaning investments that will protect your money’s purchasing power over time and help you beat the negative effects of rising prices.
There are several kinds of assets and investment opportunities that historically perform better throughout inflationary periods. Here are four different investments that can help you protect your returns:
- Commodities: Putting your money in commodities like precious metals, oil, and agricultural goods is considered to be one of the best ways to hedge against inflation, as their prices tend to increase during such periods.
- Real estate: Such investments typically perform well during high inflation, as asset prices tend to increase. If you’re not in the financial position to purchase an investment property, you can invest in real estate investment trusts (REITs) or mutual funds that invest in REITs.
- U.S Treasury Inflation-Protected Securities: Usually called TIPS, these bonds are indexed explicitly for inflation, which means that no matter how high inflation goes, the value of the investment is adjusted in a way that ensures you don’t lose money.
- Stocks: This probably won’t surprise you, but stocks can also be a great hedge. While inflation may reduce your returns for a short period of time, if you have investments in companies that are on track to stay relevant and grow for decades to come, you will likely see an increase in the value of your investment in the long run.
Final Thoughts
Remember that inflation and deflation are cyclical in nature, and periods of high inflation are likely to occur several times throughout your life. There may be rebounds from extreme periods of inflation, but the general downward trend of the purchasing power of the dollar is evident.
If you learn how to invest your money smartly, you can avoid many of the significant effects of inflation. A portfolio with diverse long-term investments can help protect your money’s value and put your mind at ease.
Please feel free to reach out to me on this or any of your investment needs or questions. I may not always have the answers at my fingertips, but I promise I will get them for you. Michael Torrence
Founded in 2010, our services include boutique hedge funds, separately managed accounts, financial planning, estate & trust services, private placements and in-house concierge services for high net worth individuals, families, and businesses.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All investments involve risk including the loss of principal.