Inflation is every investor’s boogeyman. It is a silent killer that eats up portfolio returns without leaving a trail as it erodes the purchasing power of its gains. It can turn once-profitable assets into money-losing machines.
If you have been worrying about what higher prices in the economy can do to your investments, this video provides detailed information about how inflation can affect a portfolio and what investors can do to hedge against it.
Want to read more about how to hedge against inflation? Read our post here:
⏰ Timestamps:
0:00 – Intro
0:40 – What is Inflation?
2:18 – How Does Hedging Against Inflation Work?
3:50 – Inflation Proof Investments Worth Considering
3:56 – Inflation Proof Investment 1
4:54 – Inflation Proof Investment 2
5:40 – Inflation Proof Investment 3
6:40 – Inflation Proof Investment 4
7:16 – Inflation Proof Investment 5
8:13 – Inflation Proof Investment 6
8:40 – Inflation Proof Investment 7
10:11 – Investments That Don’t Perform Well During Inflation Periods
10:15 – Long-Dated Fixed-Rate Bonds
10:36 – Long-Dated Fixed-Rate CDs
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Video host: Sean Lehman
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HOW TO: Hedge Against Inflation
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Inflation is a serious concern for everyone, especially those in the middle and lower income groups. As prices for goods and services rise, purchasing power decreases and financial stability becomes harder to maintain. However, the top 1% have a secret: they know how to hedge against inflation. Here are seven ways to do it.
1. Invest in Real Estate
Real estate is an asset that can appreciate over time while providing a steady stream of rental income. Property prices tend to rise over the long term, keeping pace with inflation, making real estate a good hedge against inflation. Moreover, rental income can adjust with the inflation, hence, the owners won’t have to bear the impacts of inflation on their returns.
2. Invest in Commodities
Commodities, such as gold, copper, silver, and oil, are real assets that have intrinsic value. This makes them relatively stable investments in times of inflation. As the value of currency decreases, the value of these commodities remains relatively high. Buying gold or other precious metals is a good way to protect against inflation.
3. Invest in Stocks
Shares of companies that sell goods and services that people need no matter what the economic situation is are relatively stable Investments in times of inflation. For example, consumer staple stocks tend to perform well during inflation. Moreover, companies that have products which are essential for basic purposes, like food or medicine, tend to boom during inflation periods.
4. Inflation-Linked Bonds
Inflation-linked bonds are issued by governments or corporations and are designed to adjust for inflation. The interest is adjusted periodically, depending on the rate of inflation, ensuring that investors receive a real return. Inflation-linked bonds can help protect against the eroding effects of inflation.
5. Reduce Debt
Inflation erodes the purchasing power of money, but it also erodes the value of debt. If you have a fixed-rate loan or mortgage, inflation may help to reduce the real value of your monthly payments as your income grows over time. So, if you have any high-cost loans or mortgages, pay them off to minimize the impacts of inflation.
6. Diversify Your Portfolio
Diversifying your portfolio is one of the best ways to hedge against inflation. By holding a mix of assets that perform differently, during inflation or deflation, the effects of inflation can be mitigated. It’s always better to have a mix of assets that will move independently of one another during different market scenarios.
7. Start Saving Early
Saving money is one of the keys to financial stability. If you can start saving early and regularly, by the time you retire, you will have saved enough to help protect against inflation. You will also have more time to grow your investment in various hedging instruments to protect against Inflation.
Conclusion
Hedging against inflation is essential to maintain financial stability. The top 1%, use these strategies to protect their wealth against eroding effects of inflation. It’s important to invest in a diversified portfolio while keeping some precious metals, cash, and bonds to protect your money against uncertain times. Inflation will continue to be a concern; hence, its high time to start hedging against inflation to stay ahead of the Game.
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