{"id":118289,"date":"2021-07-15T20:15:11","date_gmt":"2021-07-15T20:15:11","guid":{"rendered":"https:\/\/fin2me.com\/?p=118289"},"modified":"2021-07-15T20:15:11","modified_gmt":"2021-07-15T20:15:11","slug":"the-best-ways-to-invest-when-inflation-takes-off","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/the-best-ways-to-invest-when-inflation-takes-off\/","title":{"rendered":"The best ways to invest when inflation takes off"},"content":{"rendered":"<ul>\n<li>Inflation surged more in June than it has in more than 10 years, and the news has investors worried.<\/li>\n<li>Rising prices can erode a portfolio&#x27;s profit.<\/li>\n<li>But there are some moves investors can take to shield their money from inflation \u2014 and even take advantage of the environment, experts say.<\/li>\n<\/ul>\n<p>Inflation surged more in June than it has in more than 10 years, and the news has investors worried.<\/p>\n<p>That&#x27;s because rising prices can erode a portfolio&#x27;s profit. Most simply, as the cost of living swells, your returns don&#x27;t go as far.<\/p>\n<p>That&#x27;s a particularly tough challenge for retirees, who may rely mostly on their investment yields to pay their bills, whereas younger people still have a salary. And then there&#x27;s the fact that inflation can cause the Federal Reserve to raise interest rates, which tends to be bad for equities.<\/p>\n<p>&quot;In general, inflation is usually negative for stocks,&quot; said Amy Arnott, a portfolio strategist at Morningstar.<\/p>\n<h2>More from Portfolio Perspective<\/h2>\n<p>Here&#x27;s a look at other stories impacting portfolio planning and retirement saving:<\/p>\n<ul>\n<li>How to reduce the tax bite of the coming great wealth transfer<\/li>\n<li>Many 401(k) investors don&#x27;t use target-date funds the right way<\/li>\n<li>Inflation concerns have many retirees worried about running out of money<\/li>\n<\/ul>\n<p>She pointed to history: Between 1973 and 1981, inflation rose by more than 9% a year. During the same period, stocks shed about 4% annually.<\/p>\n<p>But don&#x27;t panic \u2014 doing so has never helped an investor.<\/p>\n<p>First of all, we still don&#x27;t know if rising prices will become the new normal or\u00a0if\u00a0they&#x27;re just a temporary result of a nation emerging from a pandemic and a year of lockdowns and restrictions.<\/p>\n<p>Either way, history shows that stocks beat inflation over the long term.<\/p>\n<p>The average annual return on stocks was around 11% between 1900 and 2017, according to calculations by\u00a0Steve Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.<\/p>\n<p>After subtracting the cost of inflation, that average annual return remains a handsome 8%.<\/p>\n<p>Still, there are some moves investors can make to protect their money from inflation \u2014 and even take advantage of the environment, financial advisors say.<\/p>\n<h2>How to take advantage of rising prices<\/h2>\n<p>Alex Doll, a certified financial planner and president of Anfield Wealth Management in Cleveland, Ohio, has been pulling back on his clients&#x27; exposure to growth stocks of late. And he&#x27;s been increasing their allocation to value stocks, or companies trading at rates below average in the S&amp;P 500.<\/p>\n<p>&quot;Value stocks can do a bit better during inflationary periods,&quot; Doll said.<\/p>\n<p>That&#x27;s because these companies are often in industries, such as the financial and consumer staples sectors, that get hit less hard by inflation, Doll said: &quot;These industries tend to perform better because they have more pricing power and are able to increase their prices with inflation better than other industries.&quot;<\/p>\n<p>These businesses are also usually already well established, he said, and so you don&#x27;t have to worry as much about their expected growth waning in value.<\/p>\n<p>Another good match for investors worried about inflation are Treasury Inflation Protected Securities, or TIPS, said CFP Nicholas Scheibner, a wealth management advisor at Baron Financial Group in Fair Lawn, New Jersey.<\/p>\n<p>These securities carry a similar risk as other fixed income investments, he said, but they add an adjusted principal amount if inflation increases.<\/p>\n<p>Other hedges to inflation include investing in real estate, gold and even cryptocurrencies, advisors say.<\/p>\n<p>&quot;Real estate performs well because landlords and property owners see the values of their properties increase,&quot; Doll said. &quot;Also landlords can somewhat easily pass-through rent increases.&quot;<\/p>\n<p>The argument for investing in cryptocurrencies or gold amid inflation is that those assets are not damaged by the eroding value of cash.<\/p>\n<p>However, both are highly volatile and shouldn&#x27;t make up more than 5% of your portfolio, experts warn.<\/p>\n<h2>Investments to avoid amid inflation<\/h2>\n<p>Because an interest rate hike by the Fed might be in store, experts recommend that you don&#x27;t tie up too much of your money now in any long-term bonds or certificates of deposits. Doing so could lead you to miss out on higher rates later.<\/p>\n<p>&quot;I advise clients at present to focus on short to intermediate-term bonds and avoid any investments that have &#x27;long term&#x27; in the name,&quot; said Doug Bellfy, a CFP at Synergy Financial Planning in South Glastonbury, Connecticut.<\/p>\n<p>Another area you may want to stay away from is growth stocks, or companies with higher-than-average expected earnings, Doll said.<\/p>\n<p>&quot;Growth stocks tend to perform worse because they expect to earn the bulk of their cash flow in the future,&quot; Doll said. &quot;And as inflation increases, those future cash flows are worth less.&quot;<\/p>\n<p>Source: <a href=\"https:\/\/www.cnbc.com\/2021\/07\/15\/the-best-ways-to-invest-when-inflation-takes-off-.html\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inflation surged more in June than it has in more than 10 years, and the news has investors worried. Rising prices can erode a portfolio&#x27;s [&#8230;]<\/p>\n","protected":false},"author":3,"featured_media":118288,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The best ways to invest when inflation takes off - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/the-best-ways-to-invest-when-inflation-takes-off\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The best ways to invest when inflation takes off - Fin2me\" \/>\n<meta property=\"og:description\" content=\"Inflation surged more in June than it has in more than 10 years, and the news has investors worried. 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