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
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.
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
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
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
“You want to own companies with higher fixed costs, higher
pricing power [and] lower labor exposure,” she said on CNBC’s “Halftime Report”
“You don’t want to own companies that are priced for
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
With consumer prices up in October 6.2% from the year prior,
now is also a good time to review your income. Look for ways to increase that
income or do your best to negotiate an adequate raise to combat inflation,
Buying items in bulk can also protect you from future price
Also consider locking in prices for things in today’s
dollar, like a prepaid college plan or funeral expenses, Goldberg suggested.
With mortgage rates still low, refinancing your mortgage now
to lock in a good rate can save you money, he said.
The national average interest rate for a 30-year fixed
mortgage refinance is 3.35%, according to Bankrate.
“If inflation really does take hold longer than investors
expect, interest rates should go up,” Goldberg said.
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