What to Invest in During Inflation: 6 Strategies for Investors

Share This Post

Share on facebook
Share on linkedin
Share on twitter
Share on email

Is there such a thing as inflation-proof investing? You can’t hide from inflation completely; however, you can plan for and protect yourself against it. As a financial advisor in Bountiful, UT, we will share what we think are some good investment ideas during inflation in this article.

 

Let’s focus on the silver lining of inflation related to your wealth. Work with ARS to protect your nest egg. 

 

Amidst the perfect storm of elevating inflation investors are searching for safe methods to save and potentially grow their funds. These options might be a great place to begin if you are looking for financial guidance to navigate the volatile market, rising inflation rate, and higher prices. 

6 Strategies for Investing During Inflation 

Wealthy investors are known to have a well-diversified portfolio that incorporates many of these methods. Remember, each of these inflation hedges is not for every investor. You need to discuss your current risk tolerance, time horizon, and financial situation with a CERTIFIED FINANCIAL PLANNER™. 

1. Add real estate to your portfolio.

Real estate offers unique advantages during high inflationary periods; holding a fixed-rate mortgage is the most substantial. With more interest rate hikes to come this year, investors are locking in lower rates. 

Real estate has served as a popular hedge against inflation and a great way to create income for retirees, whatever the market. Read What Homebuyers Need to Know as Inflation Continues Rising.

2. Emphasize growth and quality in equity investments.

Since rising inflation negatively affects high dividend-paying stocks, much like long-term bonds, it becomes more advantageous to invest in growth stocks and funds. 

Focus on sectors that are inclined to benefit from inflation, such as food, energy, healthcare, technology, and building materials. These will likely perform better than other equity sectors.  

3. Keep your cash in money market funds like Treasury Inflation-Protected Securities (TIPS).

Money market interest rates increase with the general market. However, you don’t have to deal with the loss of market value that accompanies fixed-rate investments like traditional bonds during times of inflation. Park your cash in money market funds that are interest-bearing investments.

Consider Treasury Inflation-Protected Securities (TIPS), bonds whose interest rate and principal payments rise with inflation. Even though they provide lower yields, that may be a temporary solution in exchange for higher principal and interest payments down the road.

4. Steer clear of long-term fixed-income investments.

During high inflation, avoid long-term (10 years or more), fixed-rate interest-bearing investments. Why? The value of the security is inversely correlated to interest rates. The value of these investments drops as investors sell them and choose other higher-yielding alternatives when interest rates increase.

For example, a 30-year bond paying 3% could reduce in value by 40% if interest rates rise to 5% on newly issued 30-year bonds.

5. Commodities are desirable during inflationary periods. 

Sometimes considered the most popular in inflationary environments are gold, silver, and other precious metals. However, you can include to that list: oil, grain, electricity, beef, natural gas, emissions, and foreign currencies.

As for precious metals, you can hold them in a direct form, such as coins or bullion bars. And/or you can invest through exchange-traded funds (ETFs) that contain any of the above actual investment(s). You can invest in commodity stocks or funds composed of these stocks. 

6. Convert adjustable-rate debt to fixed-rate.

As an inflation-proofing practice, you can roll your adjustable-rate debt over to fixed rates, such as with home equity lines of credit and credit cards. It helps to know when your loan rates will increase to plan ahead.

Since we know that inflation hurts both bonds and stocks (generally), rethinking how you hedge risks can be your next best move for 2022. A traditional 60/40 portfolio can host substantial losses. Read more about the negative returns on bonds.

What does this tell you?

  1. It might be time to invest in alternatives vs. bonds to create safety and potential income.
  2. It pays to be aware of the market.
  3. It helps to have a basic understanding of your purchasing power.
  4. Repositioning is important.
  5. You can and should protect your portfolio from inflation.
  6. Getting help from a financial advisor in Utah is in your best interest.

It’s taking more time than hoped, as the Federal Reserve is still trying to calm inflation by easing monetary policy and raising interest rates. For now, you can add some of the above investments that perform well in inflationary environments to help your portfolio survive and thrive. After all, inflation is not the determining factor in the health of your wealth- you are. 

 

Let’s discuss rebalancing your portfolio with some of the above strategies. Connect with ARS to get started!

 

Reach out to our team of Advanced Retirement Strategies (ARS) financial advisors in Utah to get your complimentary retirement review and portfolio analysis and see where you can position yourself better. With decades of experience navigating bull and bear markets for our clients, ARS advisors are precisely who you need to protect your wealth and financial future.

Review our financial services and schedule an appointment today: 

Our DREAM process allows us to work as a team in prioritizing your goals, creating income and investment plans, and monitoring the results long-term. We look forward to getting to know you soon as you strive toward your ideal retirement.

Advanced Retirement Strategies eBook offer

CERTIFIED FINANCIAL PLANNERS™ at Advanced Retirement Strategies

Working with a CERTIFIED FINANCIAL PLANNER™ is an excellent investment of your time and money. With the high standards for CFP® certification, you’ll know you’re getting the expertise and knowledge of a highly-trained and educated professional who will always act in your best interests and with the loftiest ethical standards. 

Our team of retirement planners and investment advisors in Bountiful, Utah specializes in helping diligent savers with $250,000 or more of investment and retirement assets (not counting your primary residence) prepare for and then transition into retirement. 

If you’re looking for a CFP® to help you live the retirement you have dreamed of, contact us now.

Request a Free Consultation

Schedule a free 15-minute conuslation with an industry expert to discuss your specific situation and create a plan of action.

Request a Free Portfolio Analysis

Through our proven process and forensic analysis of your current financial situation, we'll identify areas for improved return, decreased risk, and lower taxes.

You might also like:

Worried senior man using laptop at home
Inflation

How Does Inflation Affect My Retirement?

Was the re-opening of the economy scary for you? For many, it was downright terrifying, as around three million people were forced into retirement early

What if we could...

Learn about our free, comprehensive retirement review and investment portfolio audit and see how it can benefit you.