Smart investing: Tips to help you protect your money against inflation

You work hard for your money. You save part of your budget and make sacrifices to achieve your financial goals. But what happens when your hard-earned money starts to lose its value? This is called inflation, and it’s a real threat to your wealth. Over time, inflation can erode the purchasing power of your money, making it worth less and less. 

That’s why investing in assets that will hold their value, or even increase in value, over time is important. By investing in assets that are protected against inflation, you can secure your money and ensure that it retains its purchasing power. 

The best ways to protect your money from inflation

1. Understand what inflation is 

To protect your money against inflation, it’s crucial that you first understand what it is. In short, inflation refers to an increase in the price of goods and services over time. There are several reasons for this, such as an increase in the cost of living or a decrease in the dollar value. Regardless of the cause, inflation can severely damage your purchasing power.

2. Consult with a finance coach before making an investment

Making any investment can be a big decision and should be taken seriously. Before committing to anything, you should know what you’re getting into. That’s where a finance coach can be a valuable resource. By hiring a finance coach, you will gain a deeper understanding of investing, and they can offer guidance on the best choices for your specific situation. They can also help you to make a plan and set realistic goals.

3. Diversify your investments

Another way to protect your finances against inflation is to diversify your investments. This means investing in various asset classes, both tangibles and intangibles. By diversifying, you’ll ensure that even if one asset class takes a hit from inflation, others may not, allowing you to weather the storm financially.

4. Invest in physical assets such as property or commodities

Physical assets are a great way to protect your money against inflation. This is because they are limited in supply, and their prices usually go up as demand increases. For example, land is a limited resource that becomes more valuable as the population grows. Commodities such as gold and silver have also historically been a good hedge against inflation. This is because rare metals are not subject to the same economic forces as other assets, such as stocks and bonds. 

5. Invest in real estate investment trusts (REITs)

REITs allow you to invest in a portfolio of income-producing real estate assets such as office buildings, shopping malls, or apartments. Long-term leases with rent increases tend to benefit REITs during periods of high inflation. This means they can keep up with rising prices and still generate healthy profits for investors. 

6. Buy shares of companies with strong competitive advantages

Companies with substantial competitive advantages tend to do well during periods of high inflation because they can better pass on higher costs to consumers without losing their market share. For example, Coca-Cola and Procter; Gamble have essential products people continue to buy even when prices rise. As a result, these companies have been able to lead the stock market during periods of high inflation. 

Note: We advise you to invest in your knowledge. Before taking the stock market’s first steps, you must carefully study the rules and possible risks. High returns are always associated with high risks, which is why we strongly discourage novice investors from using aggressive investment methods such as futures and options. First, you need to gain practice and create a strong base on small amounts – and only then can you think about high profits.

7. Consider investing in tips (treasury inflation-protected securities)

TIPS are U.S. government bonds whose principal is adjusted for changes in the Consumer Price Index (CPI). This means that if there is inflation, the bond’s principal amount will increase along with prices. The interest payments on TIPS also increase along with CPI, providing investors with a real rate of return after accounting for inflation. TIPS can be a great way to protect your portfolio from the effects of inflation while still earning a decent return on your investment. 

Time to beat the inflation!

The impact of inflation on society can be severe, causing many problems for people from all walks of life. Inflation can be a scary financial concern, but there are ways you can protect yourself against it. By investing in tangible assets, diversifying your investments, and staying informed, you can protect your finances against the negative effects of inflation. So don’t let inflation get you down—use these tips to keep your money safe!

23/11/2022