How a Structured Portfolio Can Combat the Hardships Of Inflation

It’s a question that many novice and seasoned investors are curious about: What will inflation do to my investment portfolio? It’s a fair question to ask, as the state of the economy is a driving force for how people invest and how well their stocks and assets perform. While the early onslaught of COVID-19 caused many economies to weaken, many have since recovered, even in the face of inflation. By doing your own research and working alongside a qualified financial planner in Fairfield CT, the process of structuring your portfolio will become feasible and so too will the intentions of securing your families intergenerational wealth for years to come. We will go over the various strategies when creating a portfolio that can combat the intricacies of inflation, as well as analyzing how those in the BIPOC community can make sound investments for their portfolios as well!

Putting Together Your Portfolio: What To Know

When discussing the importance of financial wellness on this blog, we opt to view it from more of a holistic lens which we like to call “financial therapy”. Financial planning doesn’t need to be a strenuous task. If you approach it from this perspective, it will certainly make the process of planning much more enjoyable, and it will yield much more involvement from the consumers. As we’ve discussed in previous blogs, there are many aspects of our lives that we can deal with as they come and hope for the best. This is not the way to approach your financial wellness as prior planning prevents you and your loved ones from dealing with unnecessary ramifications.

Simply put, inflation is when there is an increase in prices over a given period of time. Things like food, gas, and energy, are a few examples of products/services that are impacted by inflation. According to findings compiled on Reuters, food prices jumped 0.9% after increasing 0.4% from the previous month. This was deemed the biggest rise in food prices since April of 2020, and much of this was driven by an increase in the price of meat. Gasoline prices have also been affected, with US oil prices exceeding $80 dollars a barrel for the first time in 7 years.

As for energy prices, these are on the surge as well and the economy is feeling the effects. With that in mind, economists are chiming in and emphasizing that the rise in energy prices would need to be more powerful than how it is currently, in order to cause a recession. Regarding the state of the entire supply chain, as it stands, crises could remain in place through 2022.

The bottlenecks have slowed down international commerce, and experts are weighing in and advising consumers to get their holiday shopping done earlier. Even though many of these updates can leave you in disarray, it’s still possible to navigate around these hardships and trudge along with smart investment ventures.

Inflation is one of those factors that imposes unique challenges for investors. Your investments could be growing in their value, but inflation can be reducing the value on the back end. The only way to weather the storm is by investing in initiatives that can benefit from inflation. There are no guarantees but speaking best case scenario, certain investments can be inflation-safe. Inflation is expected to reach 5.5% by December, but it will fall back around 2% in 2022, based on findings from Kiplinger. While this is indicative of better long-term outcomes, it’s important to keep your guard up at all times. These types of situations are sufficient in keeping investors on their feet, that way they can strategize and make informed decisions.

Here are 3 key strategies you can implement in your portfolio:

Keeping Cash in Money Market Funds or TIPS

While money market funds don’t pay out all that much, their popularity is continuing to soar, during periods of inflation. The rates will continually fluctuate and will adjust upwards as interest rates increase. Since they increase with the general market, you won’t need to endure any losses in market value which ordinarily affects fixed-rate investments during these times.

Real Estate and Inflation

Real estate ventures respond well to inflation. It’s a hard asset and it often sees an immense price appreciation during periods of high inflation. Investors can invest directly in residential or commercial properties, or investing in the REIT (real estate investment trusts) is another option too.

Fixed-Income Investments Might be Challenged

These are deemed the worst kinds of investments to put money into, during moments of inflation. The biggest problem with these investments is that when interest rates increase, values with underlying security will flatline, as investors scurry to obtain higher-yielding options.

While these 3 methods are viable for taking on inflation, you should set up a time to speak with a qualified financial planner in CT, to discuss additional options, based on your personal situation.

Putting Together A Portfolio With A Financial Planner in Fairfield CT

If you’re looking to learn more about the fundamentals of financial wellness and prosperity, then look no further than Armah Financial Services. We are committed to providing you with the knowledge to make smart financial decisions that will secure you and your families for the foreseeable future! Contact us today to set up a time to speak!