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Can Your Portfolio Handle Inflation?

There are those who believe that overall inflation rates will see a massive surge around the globe due to the economic strain and pressures brought about by COVID-19, while others believe that these same inflation rates have simply been too low for too long and that something has got to give. With the exception of the small handful of countries that have been reporting either negative inflation (or even deflation), it’s imperative that you ensure your portfolio can stand up to the inflation rate wherever you may be on the globe

It can essentially be summed up as such: A dollar doesn’t buy what it used to, so it’s unlikely that it will have the same buying in the future, so you need to make sure your investment dollars grow to match inflation, if not outperform it.

Various strategies to hedge against inflation

Naturally, everyone wants to make the best of their investment portfolio, but you should also take into serious consideration the fact that certain assets have traditionally withstood rises in inflation over time. Think of these time-tested assets as the buffer through which to mitigate any possible losses in other asset classes like equities, for example. These are the assets you may want to consider focusing on, depending on the level of risk you’re willing to take on.

Real estate

Real estate is always a sound investment because, ultimately, everyone needs property. People need shelter, regardless of whether they rent or own, so a real estate investment always has the potential to be a lucrative and rewarding prospect, regardless of inflation rates. It will always be needed. Moreover, the value of real estate often tends to increase with inflation, which only serves to benefit you all the more. If the ownership and management of a property is a concern for you (even if it is your primary residence), you can always find other real estate opportunities such as a real estate investment trust, otherwise known as a REIT. These allow you to invest in property without the burden of having to own it outright or exhaust time and energy managing the property.


Of course, shelter isn’t the only thing that people absolutely need. Regardless of the economic circumstances, there are other commodities that have proven to be historically viable in times of economic uncertainty and inflation. Commodities such as oil, metals, oranges, coffee and beef are just a few of many commodities that are generally thought of as being sound hedges towards protecting your portfolio against inflation. Of course, not everyone has the means to stockpile large amounts of commodities, let alone maintain them (like cattle, for example), which is why the option of mutual funds or exchange traded funds in commodities may be a more prudent option for many.

Inflation-linked bonds

Lots of countries around the globe (including the US and Canada) offer what’s called inflation-linked government bonds in an effort to help raise funds while simultaneously providing protection from inflation. Depending on the country, these bonds usually correspond to a consumer or retail price index. As inflation rates rise, both the principal owed and the interest that needs to be paid will increase accordingly and adjust themselves as well.

Convert variable-interest debt to fixed

Another option available to those looking to protect their financial interests against inflation is to convert debt from what’s known as variable-interest debt to fixed interest debt. Generally, when inflation is on the rise, the central banks will hike interest rates to counter the spike and there is a strong likelihood that variable interest rates will rise along with it. The benefit of fixed interest rates is that they avoid this type of fluctuation. If you are uncertain as to how much or how severe these fluctuations may be, however, it is highly advisable that you speak to a financial expert before choosing to opt for a variable-interest to fixed- interest conversion.

When was the last time you reviewed your investments?

Obviously, converting your entire portfolio to these types of investments would be unnecessary, even in times of economic stress. While something like inflation may impact your current investments negatively, these things tend to level out or even completely withstand economic chaos. Not always though, unfortunately, which is why a trusted financial advisor like myself can help you look over your investment portfolio and help you make the tough decisions to ensure a sound and stable financial future.

Richard Cayne based in Bangkok Thailand heads the Meyer Group which is a wholly owned subsidiary of://Asia Wealth Group Holdings Listed on the Aquis Stock Exchange in London UK

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