Free Money Cash Ways

Business

How can I protect my investments from inflation?

, How can I protect my investments from inflation?


, How can I protect my investments from inflation?

How can I protect my investments against inflation?

Even as your investments increase in value, inflation can eat away at what they’re worth.

There are things investors can do to hedge the immediate effects of inflation, or earn a return that outpaces inflation over time. But it can be hard to predict.

“After-inflation returns are the only ones that matter for investors in the real world,” says Robinson Crawford, an investment adviser with Montebello Avenue.

Even if inflation is currently rising more slowly than analysts predicted, it’s better to be prepared.

Stocks

Financial advisers say one of the most consistent hedges against inflation is a properly diversified stock portfolio.

Equities have historically outpaced inflation, says Sean C. Gillespie, a financial planner with Redeployment Wealth Strategies says that while there is inherent volatility in a stock portfolio, “equities are a long-term asset for your plan just like inflation is a long-term threat.”

To figure out where to put your money in the stock market, investors could look to a total return strategy that relies on equities to provide positive inflation-adjusted returns over the long term.

“Of course, investors have to accept more risk when investing in stocks and endure periods when the returns have not outpaced inflation,” says Dejan Ilijevski, an investment adviser at Sabela Capital Markets. “Although some investors may assume that higher inflation leads to lower stock performance, US market history shows that nominal annual stock returns are unrelated to inflation.”

Gold and commodities

Gold and commodities have been standard havens from inflation for investors.

“Traditionally commodities and gold have been good inflation hedges,” says Stephanie Bucko, a chartered financial analyst and co-founder of Mana Financial Life Design. But she says it is important to take into account the US dollar’s strength as part of this equation.

“We like oil exposure, as this impacts our clients on a day-to-day basis related to gas prices, but it also provides a good inflation hedge,” says Bucko, adding that we saw this in the 1970s as inflation doubled and nominal oil prices skyrocketed.

But commodity markets, for the unfamiliar, can be complex and risky.

“Commodities are volatile, more so than stocks, which means that adding commodities to a portfolio may increase real return volatility, offsetting the benefits of hedging,” says Ilijevski.

Real estate

Real estate is the ultimate hard asset in times of inflation since it will see price appreciation. Financial advisers suggest investors find a place for real estate in a portfolio.

Investors can gain exposure to real estate by directly owning commercial or residential property, or by investing in real estate investment trusts (REITs).

Real estate is a sound investment, says Crawford. “But I would caution that if you’re not increasing rent in your real estate, you aren’t fighting inflation.”

Short term bonds and TIPS

Short-term bonds and Treasury Inflation-Protected Securities (TIPS) are investments that are a hedge against inflation.

“Hedging seeks out asset classes that tend to positively correlate with inflation,” says Ilijevski.

For example, he says, short-term maturities allow bond-holders to more frequently roll over the principal at higher interest rates. This helps inflation-sensitive investors keep up with short-term inflation.

Similarly, TIPS, issued by the government, are also a fixed-income security hedge against inflation. Their principle is adjusted to reflect changes in the Consumer Price Index. When CPI rises, the principle increases, resulting in higher interest payments.

“TIPS absolutely merit a place in a US investor’s portfolio, especially those with significant bond holdings,” says Crawford. “The main issue is that they increase in value in conjunction with the CPI, which many would argue is not an accurate inflation measure.”

CNNMoney (New York) First published October 11, 2018: 2:19 PM ET



Source link

Have any Question or Comment?

Leave a Reply

Categories

Arts & Entertainment
Business / Investing
Computers / Internet
Cooking, Food & Wine
E-business & E-marketing
Employment & Jobs
Fiction
Games
Green Products
Health & Fitness
Education
Home & Garden
Languages
Mobile
Parenting & Families
Politics / Current Events
Reference
Self-Help
Software & Services
Spirituality, New Age & Alternative Beliefs
Sports
Travel
Betting Systems
As Seen On TV

Arts & Entertainment


Architecture
Art
Body Art
Dance
Fashion
Film & Television
General
Humor
Magic Tricks
Music
Photography
Radio
Theater

Business / Investing


Careers, Industries & Professions
Commodities
Debt
Derivatives
Economics
Equities & Stocks
Foreign Exchange
General
International Business
Management & Leadership
Marketing & Sales
Outsourcing
Personal Finance
Real Estate
Small Biz / Entrepreneurship

Computers / Internet


Databases
Email Services
General
Graphics
Hardware
Networking
Operating Systems
Programming
Software
System Administration
System Analysis & Design
Web Hosting
Web Site Design

Cooking, Food & Wine


Baking
BBQ
Cooking
Drinks & Beverages
General
Recipes
Regional & Intl.
Special Diet
Special Occasions
Vegetables / Vegetarian
Wine Making

E-business & E-marketing


Affiliate Marketing
Article Marketing
Auctions
Banners
Blog Marketing
Classified Advertising
Consulting
Copywriting
Domains
E-commerce Operations
E-zine Strategies
Email Marketing
General
Market Research
Marketing
Niche Marketing
Paid Surveys
Pay Per Click Advertising
Promotion
SEM & SEO
Social Media Marketing
Submitters
Video Marketing

Employment & Jobs


Cover Letter & Resume Guides
General
Job Listings
Job Search Guides
Job Skills / Training

Fiction


General

Games


Console Guides & Repairs
General
Strategy Guides

Green Products


Alternative Energy
Conservation & Efficiency
General

Health & Fitness


Addiction
Beauty
Dental Health
Diets & Weight Loss
Exercise & Fitness
General
Meditation
Men's Health
Mental Health
Nutrition
Remedies
Sleep and Dreams
Spiritual Health
Strength Training
Women's Health
Yoga
Dietary Supplements

Education


Admissions
Educational Materials
Higher Education
K-12
Student Loans
Test Prep & Study Guides

Home & Garden


Animal Care & Pets
Crafts & Hobbies
Entertaining
Gardening & Horticulture
General
Homebuying
How-to & Home Improvements
Interior Design
Sewing
Weddings

Languages


Arabic
Chinese
English
French
German
Hebrew
Hindi
Italian
Japanese
Other
Russian
Sign Language
Spanish
Thai

Mobile


Apps
Developer Tools
General
Ringtones
Security
Video

Parenting & Families


Divorce
Education
Genealogy
General
Marriage
Parenting
Pregnancy & Childbirth
Special Needs

Politics / Current Events


General

Reference


Automotive
Catalogs & Directories
Consumer Guides
Education
Etiquette
Gay / Lesbian
General
Law & Legal Issues
The Sciences
Writing

Self-Help


Abuse
Dating Guides
Eating Disorders
General
Male Dating Guides
Marriage & Relationships
Motivational / Transformational
Personal Finance
Public Speaking
Self Defense
Self-Esteem
Stress Management
Success
Time Management
Survival

Software & Services


Anti Adware / Spyware
Background Investigations
Communications
Dating
Developer Tools
Digital Photos
Drivers
Education
Email
Foreign Exchange Investing
General
Graphic Design
Hosting
Internet Tools
MP3 & Audio
Networking
Operating Systems
Other Investment Software
Personal Finance
Productivity
Registry Cleaners
Reverse Phone Lookup
Screensavers & Wallpaper
Security
System Optimization
Utilities
Video
Web Design
3D Printing

Newsletter

Enter your email to receive news and updates from this blog
X
%d bloggers like this: