What is inflation?
Inflation is the increase in the price of commonly used goods and services across the economy.
In the US, this is usually measured by changes in the Consumer Price Index (CPI), which is based on average prices in a hypothetical basket of essentials.
In the US, inflation has been falling in recent months from its highest levels in a generation. Between the end of February 2021 and February 2022, the CPI rose by 7.9%, the largest increase in over 40 years.
But why?
Supply chain problems triggered by COVID-19, surging consumer demand and rising wage pressures in parts of the economy contributed to the rise. The war in Ukraine has also created geopolitical issues.
How does inflation impact your investments?
Moderate inflation – around 2% – is usually accepted as a sign of economic health and stability.
It’s when prices and costs spiral too rapidly and too far from this figure people start to worry.
This kind of more pronounced inflation has a destabilizing effect on the economy and, hence, the markets. Household income is under pressure, spending power diminishes, and uncertainty reigns.
All this is bad news for the average investor, but there are ways to endure and protect your hard-earned investments.
Where should I invest during inflation?
Here are three moves you can make to protect your money from inflation:
- TIPS
- Short-term bonds
- Stocks
If you’re in any doubt about getting started, always talk to a professional investment advisor first.
Unbiased can connect you with an SEC-regulated financial advisor who can help you navigate your options. Tell us a bit more about what kind of advisor you’re looking for, and we’ll connect you. Get started here.
How can I take advantage of inflation when making investments?
Certain areas and industries tend to perform well when inflation increases.
Here are three to consider:
- Real estate
- Commodities
- Silver and gold
Get expert financial advice
When protecting your investments against inflation, you have several options.
It’s important not to make rash decisions or dramatic changes and avoid plunging into high-risk areas you know little about. Instead, use times of inflation to review your overall investment performance and structure to ensure it’s aligned with your goals.
A professional financial advisor can help you decide the best way forward and what level of risk suits you.
Here, you can get matched with an independent SEC-regulated financial advisor who can ensure you’re getting the most out of your current plan and are on course to achieving your financial goals.