New CPI data revealed that the annual inflation rate in the United States rose to 8.5%, the highest level in four decades. Inflation has not been this high since the early 1980s, as the prices of everyday items including gas, housing and food are increasing. So we asked our financial advisors: What do you do with your own money to fight inflation? (You can use this tool to match up with a financial advisor who meets your needs.)
Dividend growth stocks from quality companies – Leslie Thompson, Chief Investment Officer, Spectrum Wealth Management
“To combat the effects of inflation on my future purchasing power, I invest in dividend growth stocks with an emphasis on high-quality companies that have a competitive brand, strong balance sheet, cash flow and earnings growth—which is different from investing in stocks with the highest return. Some stocks have a meaningful return today, but the company has the desire and ability to increase its dividend in the long run.Over time, dividends have made up a large portion of the total return for the S&P 500. By investing in dividend growth stocks, I will benefit from a higher stock price as well as Cash flow growth through increased dividend flow,” says certified financial planner Thompson, who highlights that in his case, he has “at least 10 years before I need to access my investment portfolio.”
Equities and Real Estate – Andrew Ross, Private Wealth Advisor at Integrated Partners
“I have a long time horizon, so I invest primarily in stocks to combat inflation. If given enough time, stocks have historically outperformed inflation by a wide margin,” says Ross, who is also a certified financial advisor and approved credit advisor for the plan. As a long-term investor, I see 10%, 15%, 30% market pullbacks as opportunities for me to buy stocks of big companies at a discount.”
“I also think real estate is an important part of a well-diversified portfolio, and it’s fighting massive inflation. Not only has the value of my rental property increased in value, but our rental income is increasing every two to three years,” says Ross. (You can use this tool to match up with a financial advisor who meets your needs.)
Agricultural and Real Estate Investments – Tatiana Tswer Certified Public Accountant and Author A bold dream, start smart
Tsuer says real estate is a good investment during inflation, and adds that she owns “some rental property alongside our primary home.” She adds: “The skyrocketing gas prices, along with inflation, made us think about acquiring agricultural land and other agricultural investments.”
Diversified Stock Portfolio and Ultra Short Term Cash – Kyle McBrain, Certified Financial Planner at Betterment
“For the money I need in the next few months, I will keep it in cash because I know roughly how much and when I will need it. Yes, it is possible that I lose some purchasing power due to inflation, but the alternative option is to invest my money to keep up with inflation. In this alternative, I risk losing money Because of the market volatility we’ve seen a lot lately.The downside to short-term volatility in the market is likely to be greater than the downside to short-term inflation, so I’m choosing to keep my short-term money out of the market.
As for the money McBrain needs in the long run, he doesn’t change anything and remains aggressive given his long horizon. “Stocks have historically been a solid long-term hedge against inflation, so I keep my long-term investments in a diversified stock portfolio,” McBrain says.
Private Debt and Luxury Watches – Michelle Connell, Chartered Financial Analyst and President, Portia Capital Management
“To avoid further inflation/interest rate risk, I sold my bonds with maturities of three years or more and, as I did with my clients, invested the proceeds in private, collateralized debt with maturities of two years or less with variable rates,” says Connell. 6% and this intervening debt can be liquidated every three months.
Furthermore, Connell says that she considers herself a horologist (a person who collects watches). Luxury watches have increased by over 60% in the past decade and this trend is expected to continue as luxury watches are seen as a way to store wealth. Even crypto millionaires were exchanging some of the profits for luxury watches,” says Connell. (You can use this tool to match up with a financial advisor that meets your needs.)