Considering the current inflation climate, it is clear that low inflation is not guaranteed. There will always be inflation. However, you and I may protect our purchasing power by investing in ways that outpace inflation.
To combat inflation, you need a money-growing strategy that fits your needs, risk tolerance, and expected time horizon.
Here are a few strategies for accomplishing this:
Put Money Into Stocks
Many investors have experience with this type of product. Over the long term, stock returns have generally exceeded inflation. Look for companies with strong fundamentals and promising growth when picking stocks. One of the golden rules of investing is to spread your money around into other markets. Investing in stocks is risky business, so it’s important to know exactly what you’re getting into.
Purchase some bonds
If you’re looking for an alternative to fixed deposit accounts with a greater return, this asset class may be for you. Bond exchange traded funds (ETFs) and unit trusts (unit trusts) invest in a wide range of bond market segments, including government bonds, investment grade corporate bonds, high yield bonds, and more.
Put Your Money in Unit Trusts
Investing in stocks, preference shares, bonds, commodities, private enterprises, and real estate through a unit trust (collective investment scheme) is a simple and (perhaps) cost-effective approach to diversify your portfolio. They allow you to invest in equities and bonds from around the world without having to join a stock exchange. You may easily diversify your portfolio with unit trust investments, and your funds will always be easily accessible.
Put your money into property
The value of real estate, like other tangible assets, rises over time. Many investors use real estate as a hedge against inflation because property values and rental revenue tend to rise in tandem. However, a large down payment of six figures is typically required for a major purchase such as real estate, making it a relatively inaccessible asset class. Real estate investment trusts (REITs) that own and manage income-generating assets are one way to continue to participate in real estate.
Invest in commodities
Historically, during times of inflation, people have turned to “value store houses” such as gold, silver, and oil. Do you not remember what your forebears told you? Invest in gold. So, they’re not entirely wrong. However, this does not rule out the possibility of price fluctuations in commodities. Keep in mind the potential downsides before moving forward.
Put your money into inflation-indexed annuities
These annuities do exist, but some of them may not be available in the market all the time. Payments under such schemes are guaranteed and are increased annually to account for inflation. If you’re looking for a source of income that can keep up with inflation, they may be a good fit.
Diversify
Don’t risk everything on a single venture. This is the most fundamental principle of successful investing. You can lower your overall risk and increase your potential for profit by investing in many types of assets. If you want to protect your investments from inflation, it’s a good idea to spread them out between stocks, bonds, real estate, and other categories.
Use Dollar Cost Averaging to invest on a regular basis
Inflation can be fought by routinely setting aside and investing a portion of one’s income. Automated dollar-cost-averaging can assist you avoid the risks of trying to time the market. With this ‘no brainer’ approach, you can remove your emotions from investing and make more rational choices. You may maximize the long-term benefits of compounding returns by investing consistently over time.
Examine and Modify
Reviewing and rebalancing your investment portfolio on a regular basis, such as once or twice a year, is a recommended habit. As economic, geopolitical, and inflationary forecasts shift, so too should your asset allocation. This will aid in preserving your portfolio’s diversification and keeping you on pace to achieve your financial objectives. Talk things over with your reliable financial counselor before proceeding.
Conclusion
In a nutshell, money can go either way while investing. Before making any major investing decisions, you should carefully analyze your existing situation, financial goals, risk tolerance, and time horizon. If you are unsure about what to do, it is best to seek the advice of an expert.
Here’s to warding off inflation! Cheers to boosting your financial stability!