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What To Do With Your Money When Inflation Is High: Experts Explain

Jenna Gleespen - April 05, 2022

inflation experts

Fears surrounding inflation have been a hot topic for many lately. Not only does inflation have an effect on our everyday lives in terms of spending, but it can also have a hefty impact on investments, especially when it comes to returns. 

So what should you do with your money when inflation is high?

Here is what these thirteen experts reveal: 

Luciano Viterale from LucianoViteral says:

inflation

“All of the typical investments such as ETFs, cryptocurrencies, individual stocks, and property have less upside than they would have 10 years ago. Unless you have a clear unfair advantage they’re defensive strategies.

Objectively speaking; the best use of your money in the current times of high inflation is to buy or build businesses. Of course, this is much harder route and is not suitable for everyone but it has the highest upside.” 

Jake Hill, CEO of Debt Hammer Debt Consolidation, tells us: 

inflation running high

Investing in real estate when inflation is running high can be a smart move. Because real estate typically does well during times of high inflation, you can take advantage of that and invest in it, even if you don’t own a property.

An accessible way to invest is through REITs, or Real Estate Investment Trusts, which are also typically low-risk, high-reward investments.”

Steve Wilson, founder of Bankdash, says: 

inflation

“I would recommend investing in gold as a hedge against inflation. As prices and general living costs rise, gold also tends to increase in value.

As seen in the past, during periods of high inflation and rising prices, stocks fell, and the value of currencies depreciated, which increased the value of gold people had invested in.

In times of political unrest, most assets fall in value, but gold increases and, for that reason, can be considered a highly beneficial investment that can save you when other investments seem in crisis. I would say that gold is one of the safest investments a person can make.

This is primarily down to the fact that gold negatively correlates to the stock market, or we can say it runs opposite to it. It helps add diversity to investment portfolios and reduces overall risk levels.”

Elena Jones, the founder at Finance Jar, says: 

“Bond funds in the United States become attractive investment vehicles during times of inflation. Likewise, I-bonds pledge to combat inflation, despite the fact that only a $10,000 purchase can be made per year.

Additionally, they’re considered non-marketable investments. Buying shares in I-bonds can not yield great profits, but it can retain asset value for a portion of a client’s profile.

As cash and long-term securities are prone to losing financial meaning throughout economic booms, considering alternatives to equities is important.”

Lucia Jensen, CEO of WeLoans, says: 

inflation high

“When inflation is running high, it leads to higher interest rates, which means that as inflation accelerates, your adjustable rates will continue to rise, potentially to unsustainable levels.

The best option is rolling over your adjustable-rate debt to fixed-rate debt. This may include credit cards and home equity lines of credit. In this case, even when your monthly payments remain the same or increase, you will pay much less in interest.

Also, when inflation rises, it can reduce the value of your investments. This is because high dividend-paying stocks, like long-term bonds, are adversely affected by rising inflation.

The better option is to focus on stocks and funds that are likely to benefit from inflation, such as energy, food, and building materials. Even though these sectors are expected to rise in price in line with inflation, they will more likely outperform other equity sectors.

For instance, you can decide to invest in energy stocks through the S&P Oil & Gas Exploration.”

David Patterson-Cole, the CEO at Moonchaser explains:

“Basically, in periods of inflation, you want to turn your cash into tangible assets. Real estate can be a good option, although prices have been rising significantly since the pandemic started, and finding a property to buy may be easier said than done.

The US saw some of the highest inflation since WWII in 1979-1980, and gold prices spiked to nearly $2500—higher than they’ve ever been before or since. If you bought an ounce of gold in 1976 for about $600 you would have seen your investment more than quadrupled in value.

Right now gold prices are about as high as they’ve been since the 1970s. If inflation is a key concern of yours and you think stocks are too risky, gold can be a decent store of value, but as with any investment there’s no guarantee it will maintain its value or rise in price in the future.”

Nathan Liao, founder & CEO of CMA Exam Academy, tells us: 

inflation

“With inflation running high, it is important to ensure you have a hefty emergency fund to prepare for any unforeseen events (like an increase in rent). You should ideally keep between 6 months to 1 year of living expenses (monthly rent or mortgage, bills, food expenses, etc.) in an emergency fund. 

One surefire way to build an emergency fund is by investing in yourself in a way that will expand your skillset and allow you to build a side business of some sort. 

For example, you can buy the necessary materials to learn digital marketing, how to create online courses to teach what you know, or buy books or courses on personal finance.

With websites such as Upwork or Fivver, it’s never been easier to sell your expertise and make money on the side. The money you make in your new business can be used to build a substantial post-pandemic emergency fund.”

Jordon Scrinko, the founder of Precondo, says: 

inflation

“Standard residences with low-interest, fixed-rate mortgages perform well during inflationary periods. As inflation rises, the value of your property will likely grow as well, while your monthly mortgage servicing cost will likely remain the same.

This is the key to building up home equity, which may dramatically increase your net worth. You may protect yourself from increasing rents by acquiring real estate. Rents, like any other consumable commodity, tend to grow when inflation rises.

Mortgages have a benefit over rental agreements when inflation is high, despite the fact that they are less flexible.”

Francis Locknear, founder and CEO of TheCostGuys.com, says: 

inflation running high

Cryptocurrency is oftentimes described as digital gold. And most experts theorize that it’s protected against inflation. The supply is limited and is often sought out by investors. However, it’s worth noting that cryptocurrency can be difficult to incorporate into your portfolio.”

Michael Jan, the financial content writer at  Pyramid Credit Repair, says: 

“We can buy things with money, such as merchandise for our company and services for our clients. We also purchase bonds and stocks, which are financial objects held by the state of the country.

While we can buy things with money, there will be price increases for everything else. If you want to save money by going to a bank and withdrawing cash, that won’t work anymore. Inflation will rob you of your savings if you really want to preserve them.

There is an important lesson with regard to money. Don’t sell your savings just because that’s what you want to do. You have to be patient in order to get the money back once inflation goes down.

If inflation is rising, then it will take away more and more of your cash before you can save again. If you want to spend less and save more, then this is the way to do it.

Martin Luenendonk, CEO at  Founder Jar, explains: 

inflation  

“Real Estate, or real estate stocks if they are closely bound to the properties.

Stocks in general, but that is complicated. In general, stocks are inflation hedges, but there are many exceptions. And the stock market is risky. OTOH, an S&P 500 index fund is reasonably safe.

If you are in business, buy stock for your business. Buy a lot more than you would if you were not worrying about inflation. Buy lots of anything that you are sure you will need in the future.”

Chris Muller, director of Audience Growth at Dough Roller, says:

inflation

“During an inflation surge, one of the most recommended ways on where you should put your money is in government bonds. These are commonly known as TIPS or Treasury Inflation-Protected Securities.

This is mainly because these bonds mirror the movement of inflation which means when it goes up, so is your bond’s interest rate. This only shows that this gives you more opportunity to diversify your investments.

And since TIPS are supported by the government, it is always ensured as a safe investment.”

Nick Bormann, CFP®, Investment Advisor at Bormann Wealth Management, says: 

“Stocks are generally seen as a favorable asset during inflation but some companies hold up to rising price levels better than others. There are a few schools of thought on this.

Firms lower on the supply chain, such as those making basic materials, might have the easiest time passing along price hikes. On the other side, firms that don’t rely on a lot of physical inputs, like software developers, won’t see their margins pressed as hard by rising material costs.

Manufacturers and retailers sitting in the middle may feel the squeeze the most – but arguably, this is already being factored into stock prices, because CEOs are already talking about supply chains and cost management in their earnings calls.

The market knows about this. Companies with strong competitive advantages should be fine either way, while the marginal operators might be in trouble.

One mistake investors can make is to over-focus on inflation and forget that the investment itself still needs to be sound, even if inflation isn’t as bad as expected.

Commodity strategies, for example, have historically pretty poor returns so going all-in on an inflation story can be long-term harmful.

Other assets like TIPS which are directly tied to price indices have already been bid up heavily. It’s possible to be right about inflation happening, but wrong about how much there will be, and end up losing money.

What To Do With Your Money When Inflation Is High: Final Words

Experts across the finance field all agree that inflation can have serious effects on our finances. By following their advice above, along with some financial planning, you can be on the way to safeguarding your finances and investments when inflation is running high. 

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Jenna Gleespen is a copywriter specializing in finance and investment finance. Originally from the United States, she now calls London, England home.