Beginner’s Guide: Understanding Inflation – All You Need to Know

by | Jul 8, 2023 | Invest During Inflation | 39 comments

Beginner’s Guide: Understanding Inflation – All You Need to Know




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Today I’ll cover the topic of inflation! What is inflation? How does inflation work? And most importantly… how to invest with inflation!

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Timestamps:

Intro (0:00)
Definitions & Examples (1:05)
How Inflation Works (4:53)
Dangers of Inflation (13:50)
How To Invest With Inflation (20:03)
Takeaway (25:00)
Outro (26:30)

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About Brandon Beavis:

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Brandon Beavis was one of the youngest advisors to become fully licensed here in Canada.

In 2013, Brandon officially began his industry studies. Over the years he has completed his CSC (Canadian Securities Course), CPH (Conduct & Practices Handbook), WME (Wealth Management Essentials), 90-day Investment Advisor Training Program, attended the Manulife Professional Development Workshop in Oakville, ON, and attended countless industry seminars, conferences & events to help further his learning.

At age 20, he became a fully licensed Investment Advisor, working for one of Canada’s largest Investment Brokers, Manulife Securities. For 4 years, he worked alongside a highly experienced team at Beavis Wealth Management, specializing in High-Net-Worth Investing. He’s had the opportunity to work under his Father, an advisor of over 25 years, and has dealt hands-on with client portfolios, involving; analyzing, building, and managing multi-million-dollar client accounts.

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About Marc Beavis:

Marc is a retired Portfolio Manager, having spent over 25 years in the investment industry, managing multi-million-dollar portfolios and working with clients of all ages. He retired in 2021 and is a regular contributor to this channel.

Following his initial licensing back in 1996, he completed a number of industry courses, including the Derivatives Fundamentals and Options Licensing Course, Portfolio Management Techniques, Wealth Management Essentials, Investment Management Techniques, Fixed Income Investing, Hedge Fund Essentials, Portfolio Theory, and of course, the Canadian Securities Course.

Marc previously served as a Director of the Canadian Association of Financial Planners (Now FP Canada) including the roles of Vice President and Director of Ethics.

When working in the industry, he held the Chartered Investment Manager (CIM) Designation as offered by the Canadian Securities Institute. In addition, Marc was a Certified Financial Planner (CFP) practitioner, the industry gold standard in financial planning.

Disclaimer: The views and opinions shared on this channel are for informational and educational purposes only. Although previously licensed, the contributors are no longer industry participants and are not licensed to provide financial advice. They strive to provide you with educational information in an entertaining manner. Always do your own research and due diligence before investing. Generally speaking, you should consult a licensed investment professional before investing.

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Inflation Explained For BEGINNERS – EVERYTHING YOU NEED TO KNOW

Inflation is a term that is frequently thrown around in economic discussions, but it can be quite confusing for beginners. Fear not, as this article aims to explain inflation in the simplest way possible, covering all the essential information you need to know.

What is inflation?

Inflation can be defined as the sustained increase in the general price level of goods and services in an economy over a period of time. In other words, it means that as time goes on, the cost of living tends to rise, and the purchasing power of money decreases.

How does it occur?

Inflation occurs due to various factors, but the most common cause is an excess supply of money in the economy. When the money supply increases, people have more money to spend, leading to an increase in demand for goods and services. As demand rises, producers increase prices to maximize profits. This increase in prices, in turn, reduces the purchasing power of money.

Types of inflation

There are different types of inflation, depending on the rate and causes. Here are the two main types:

1. Demand-pull inflation: This occurs when the overall demand for goods and services surpasses the economy’s ability to supply them. It typically happens during periods of economic growth and high consumer spending.

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2. Cost-push inflation: This occurs when the cost of production, such as wages or raw materials, increases, forcing producers to raise prices to cover their expenses.

Impacts of inflation

Inflation can have both positive and negative impacts on the economy and individuals. Let’s explore some of them:

1. Negative impact: One of the most significant downsides of inflation is the reduction in the purchasing power of money. As prices increase, the same amount of money can buy fewer goods and services. This can lead to a decrease in living standards and reduced savings.

2. Positive impact: On the positive side, moderate inflation can incentivize spending and investment. When people expect prices to rise in the future, they are more likely to make purchases or invest, stimulating economic growth.

Controlling inflation

Governments and central banks employ various measures to control inflation:

1. Monetary policy: Central banks regulate interest rates to control the money supply in the economy. By increasing interest rates, they reduce borrowing, which can help curb inflation.

2. Fiscal policy: Governments can adjust taxation and public spending to impact overall demand and inflation. Higher taxes or reduced public spending can reduce demand and slow down inflation.

Conclusion

Inflation is a complex economic concept, but understanding the basics is essential for both individuals and policymakers. As a beginner, this article should have provided you with a fundamental understanding of inflation, its causes, types, and impacts. Remember, while inflation can erode the purchasing power of money, moderate levels can also encourage economic growth and investment.

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39 Comments

  1. john kobialko

    Taxes and Inflation is a constant and has been around since ww2 to help the war effort ,and was to be stopped after the war but the government and corporate thought hey , this is a good deal just keep this up . Firer up the printing presses boys let’s stick it to the working man.

  2. Brandon Hinton

    Great video! Explained well.

  3. Montecristo

    Sorry Brandon. I just can't stop looking at your t-shirt lol. Were you in Los Cabos?

  4. Héloïse Amez-Droz

    You're my favorite channel about the economy and investing. Super clear and super interesting! Thank you for taking the time to explain inflation and get back to the basics, now I won't be so lost in conversations talking about the best ways to take advantage of it!

  5. Alberto C

    Nicely explained

  6. Don McLeod

    Inflation, great topic to cover. Many people forget the increasing inflation erodes their network if their money is "safely" tucked away in a low interest account. Blue Chip companies have higher dividends than bank interest rates. This brings up another topic to cover: Preferred Shares with high dividend rates. See EQB.PR.A

  7. jean S

    Salamat for this video. This is such an outstanding explanation. 🙂

  8. Stonkanomics

    Bitcoin is a hedge ? a hedge that goes swings 20%

  9. Victoria

    Thank you. Great content and helpful as usual

  10. Abubaker Ali

    The thumbnail is a major turn off for me it looks like one of those click bait videos, you put a lot of time and effort into making your videos in my opinion don't ruin it by following a shallow and superficial trend Please.

  11. Ada Bialynicka

    Great explanation and great advice

  12. Jack Carter

    Brandon, thanks for the video. I have one question though. How do explain that gov says inflation rate is around 1-2% every year and yet every year I see much high raise of the prices for most of the goods? For example, even talking about 2020 wood prices went up 150-200%, lots of construction materials about the same, many things raised in prices at least 30%. Even groceries get higher in price at least 5-10% every year, in some cases even 20-30% easy. I'd be happy if real inflation in Canada was around 2% every year, but based on what I see it's not even close…

  13. Saver G

    Great video. Thank you

  14. LIFE -77

    Apple been sinking,

  15. LIFE -77

    But increased interest rates pay you more for savings or CD's ,no?

  16. david smarrt

    socialism killed Venezuela and many other countries and all the kids in my class think socialism is a good thing!

  17. Michael Perry

    Another great Video Brandon

  18. Franco

    Great video. Banks would be good to have in your portfolio as well. As interest rates climb so do bank profits.

  19. Jenn C

    very well explained thank you!! 🙂

  20. billyboy4

    Are bonds, or bond ETFs a good hedge against inflation? or is it the exact opposite, should investors be running away from bonds if high inflation is on the horizon?

  21. Jason Bald

    Terrific video, Brandon. Very well explained!

  22. Krystle Joyce

    So much value in this video! Also loving the 25-30 min videos

  23. Jason Stupak

    Watched and liked, thanks Brandon! Funny how I've been researching inflation, and best investments to have. Now many of the YouTubers I watch are talking about it. My Pembina / Enbridge / Energy Transfer, REIT's & financial stocks, etc. have been doing great, and I purchased them at great dividend yields. Would have been good for you to speak on cash flowing real estate as a great hedge against inflation as well (I know that's maybe not your area of expertise though).

  24. Diego

    Many countries in South America have interest linked indexes that you can buy as a currency and that fluctuate in price based on inflation

  25. AB.

    Great video buddy!! Thank you so much!!

  26. momo whitmann

    thanks for the definition. this clears things up a bit. thank you for the video brandon!!

  27. J.P.

    Awesome video buddy, appreciate the work u put into these!

  28. KP14

    Thx Brandon. I stick with the big Canadian Banks during inflationary periods… all great businesses.

  29. Max Lapointe

    Your money is only an "agreed upon" value. What has real value are goods – houses, food, clothing, etc, and many of these goods are in limited supply. For houses it is obvious how, for food we are limited by production, etc. If you print too much money and inject 100% more money into the system but goods remain the same, then everything should double in price.

    I don't see how they expect a 2% inflation when they printed so much more money this year…

  30. Jessy Pouliot

    This was super interesting and can compare what you said to some of the stocks I own and I can see some correlation !

    I am also guessing that those companies that have alot of debt during high inflation and are falling in the stock market can be a great risk/reward play in the future ?

  31. James Kornelsen

    What fantastic information! Thank you!

  32. Mikey

    Great video Brandon. I learned so much from you today, I may even watch it again. Thanks for making this video.

  33. E K

    I'm hedging into cryptocurrencies. awwww yeahhh.

  34. Clarifying Questions

    How about real estate as a hedge against inflation?

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