As inflation rises, here are opportunities to make and save money

LeoPatrizi | E+ | Getty Images

Rising inflation has Americans worried about purchasing power and their retirement plans.

Yet there are some opportunities to make and save money in this environment, as well as protect your investments.

“Now is a great time to review your portfolio to make sure your investment allocation is set up to combat a decrease in purchasing power,” said financial advisor Delano Saporu, CEO of New York-based New Street Advisors Group.

Cash in the bank or in low-yielding bonds aren’t the best option in an inflationary environment when the stock market has gained nearly 27% this year, he noted. Inflation reduces the value of that cash.

“If you are sitting on too much cash, you are doing yourself a disservice,” Saporu said.

More from Invest in You:
Inflation is soaring. Here’s how to navigate higher consumer prices
If you don’t get a 5% raise, you aren’t taking a pay cut due to inflation
How NBA star Antoine Walker bounced back from bankruptcy in two years

That said, you should have some cash on hand for emergencies or any other future financial obligations.

For financial advisor Mitchell Goldberg, president of Melville, New York-based ClientFirst Strategy, that means enough to cover those commitments for 12 months to 24 months. This way, if inflation becomes a big issue and causes stocks to tank, you aren’t forced to sell in a down market, he explained.

Review your assets

The stock market tends to beat inflation given its rate of return, although growth may be slowed during inflation periods.

“Inflation makes future earnings worth less when discounted to today’s dollars,” Goldberg explained.

For that reason, stocks that are expensively priced compared to the rest of the market may be subject to more downside, he said.

Since inflation is typically considered a result of a strong economy, Goldberg suggests considering cyclical companies, which follow the cycles of an economy. That means sectors like industrials, energy and consumer discretionary.

Other inflation hedges are gold, which is near five-month highs, and cryptocurrency.

Yet Goldberg is investing for growth, not inflation hedges.

“I’m more into companies that can generate earnings and revenues and dividends and cash flow over the long term than I am into being just in inflation hedges,” he said.

Jenny Harrington, CEO and portfolio manager at Gilman Hill Asset Management in New Canaan, Connecticut, also has a game plan if inflation lasts.

“You want to own companies with higher fixed costs, higher pricing power [and] lower labor exposure,” she said on CNBC’s “Halftime Report” Monday.

If inflation really does take hold longer than investors expect, interest rates should go up.

Mitchell Goldberg

president of ClientFirst Strategy

“You don’t want to own companies that are priced for perfection.”

Since real estate also historically performs well during periods of inflation, Harrington also likes real estate investment trusts.

Meanwhile, Sapuro likes areas of the technology sector since tech can reduce the price of production.

Before implementing any investment strategy, it’s best to speak with a financial professional first, he said.

Smart money moves

Source link


Please enter your comment!
Please enter your name here