It’s in the news: “Inflation is on the rise!” So what? We haven’t had high inflation in a long time. If we experience short-term inflation related to COVID supply chain issues, that’s not too bad. If we experience long-term inflation and price increases are “here to stay” for a while, then investors should make sure their portfolios have the ability to keep up with these price increases.

Two things I want you to know:

  • Why is inflation bad? Well, if you have $100k in the bank and there is 5% inflation, then your 100k cash can now only buy 95k worth of goods at the end of the year. In short, you’ve experienced a 5% loss of purchasing power. This is not good.
  • What assets can offset inflation? Assets that have traditionally offset inflation (or kept up the prices increases) are:
    • Gold
    • Commodities
    • Stocks
    • Real Estate & Real Estate Investment Trusts (REITs)
    • Treasury Inflation Protected Securities (TIPS)

If you have concerns about inflation or how to manage your cash, give us a call. We would be happy to discuss inflation risk with you.

Posted in Interesting, Investments, Risk Management

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