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15 Smart Ways Investors And Businesses Can Protect Their Wealth As Inflation Rises

- August 17, 2022

View on Forbes.com

In 2020, the country was scrambling to find stability amidst the global Covid-19 pandemic. Today, inflation has reached levels the United States has not seen in decades. Many economists have pointed to supply chain issues, labor market shortages and the aftermath of a Covid-induced slowdown as the culprits for the price hikes.

Amid the ongoing commotion, many individual investors and businesses may be confused as to what investments they should make at this time—and just as important, what investment mistakes they need to avoid. Below, 15 members of Forbes Finance Council discuss some strategies investors and businesses can leverage in the face of rising inflation to protect their wealth.

1. Don’t Let Your Cash Sit Idle

Keeping too much cash on the sidelines will not help you keep up with rising inflation. Savings accounts are not paying enough. Instead, you should dollar cost average into the market at regular intervals so that your money can appreciate and you are not buying at the low or the high. Selling out at low levels is also a mistake, as you lock in losses without the ability for the assets to rebound. – Aviva Pinto, Wealthspire Advisors

2. Invest In Common Stocks

Don’t run to gold or other commodities. Investors have an excellent ability to stay ahead of inflation by owning shares in businesses. Ownership of common stocks has an unsurpassed track record of outpacing inflation. When comparing any 30-year period since 1872 or any 20-year period since 1929, there has been no other asset class that comes close to the performance record of common stocks. – Gerry Frigon, Taylor Frigon Capital Management LLC

3. Don’t Try To Time The Market

I have heard many small-business owners talk about timing the stock market in order to capitalize on significant gains. I caution against this, because I am not confident we have seen the full impact of inflation. My advice is to hold cash positions and invest in real estate and indexed options that protect you from market loss. – Joshua Sherrard, Strategic Navigators Inc.

4. Don’t Rush Into Drastic Changes In Investments

One of the biggest mistakes is overcorrecting your investment strategy to compensate for current market conditions. Changes are okay, but all investment strategies should be based on blended averages over multiple years and should not be overly affected by punctuated shifts in market conditions. Stay calculated in your decision-making process, and don’t rush to make drastic changes in your strategy. – Joseph Orseno, Tiltify

5. Keep Following Your Current Investment Strategy

I see too many people trying to time the market based on external factors such as inflation. The stock market usually prices in future expectations such as inflation, and stock prices will only be affected if those expectations are not met. The best way to invest is to ignore the apocalypse media and keep following the investment strategy you have in place. – Vlad Rusz, Centaur Digital Corp

6. Invest As The Market Gets Lower

It’s no time to play scared! Everyone loves to get in the game when it’s great and everyone around them seems to be winning. Now that all the average folks are tightening up and pulling out of their investments with losses to prepare for “tough times,” I feel it’s time to be bold. Stay lean on lifestyle and invest as markets get lower. – Kale Goodman, Easier Accounting

7. Leverage Long-Term Investments

Chasing a get-rich-quick scheme to beat inflation is a mistake I see many people make. Instead of putting a good chunk of your cash into get-rich-quick schemes, play the long game with your money. Invest in self-development, coaching, real estate or some type of business. – Daniel Blue, Quest Education

8. Remember Your Long-Term Objectives

In times of uncertainty, clients often ask, “What is the market going to do?” without remembering their long-term objectives. In inflationary times, a multi-year, disciplined approach to wealth management is paramount. Tactical portfolio adjustments must be made in order to achieve an optimized risk-adjusted return, which enhances the likelihood that each client reaches financial independence. – Michael S. Schwartz, Magnus Financial Group LLC

9. Avoid Quickly Moving To A Cash Position

I see a lot of people moving to cash positions due to the market downturn. However, cash loses value in the face of increasing inflationary rates. Remaining calm and steady and allowing your investments to reap the benefits of the market recovery could be the best move in the long run. – Justin Goodbread, WealthSource Partners, LLC

10. Resist The Temptation To Sell Stocks

Inflation scares people, especially when there doesn’t seem to be an end in sight. When people are scared, they want to hold onto their money in a savings account, but a savings account cannot keep pace with inflation. Even with falling stock prices, stockpiling cash in savings will not do you any favors. Instead, resist the temptation to sell stocks. Historically, the S&P 500 has outpaced inflation. – Jared Weitz, United Capital Source Inc.

11. Invest In People And Resources

Some clients scale back when they should be investing in their people and resources. For some industries, the most challenging financial times are the times they get to shine and expand. Businesses in the areas of client advisory services, consulting, managed services and others all have the opportunity to significantly expand their footprint during recessions and times of inflation. – Cynthia Hemingway, Fourlane, Inc.

12. Be Wary Of ‘Trendy’ Stocks

Some investors hang onto their money, not realizing that investing more when they are making money will help them build a solid future. Other investors are easily swayed by excitement, especially if everyone else is buying without thinking. As a result, when those investors see a high-performing stock, they sell their other investments and put their money into that high-performing stock, ignoring its long-term performance. – Neil Anders, Trusted Rate, Inc.

13. Buy Rental Real Estate

One of the things many clients want to do in this inflationary period is invest in real estate, which typically holds against inflation. The mistake I have seen most often is how they want to do that. Buying personal homes is not necessarily the right investment, because that will come with costs that come out of your pocket. On the other hand, rental real estate investments put cash back into your pocket. – Evan Jehle, FFO LLC

14. Don’t Assume Current Conditions Will Last Forever

Some clients are making short-term decisions based on emotions when their goals are long-term. When we see the inflation numbers in the media, we get fearful and believe these rates will stay this high forever. History tells us that is not the case. Sit down with your financial advisor and create different stress tests to see how your portfolio and plan change with different market conditions. – DeLynn Zell, Bridgeworth Wealth Management

15. Review Your Investment Strategy With Your Financial Advisor

Investors should never rush into liquidating their investment accounts based on the ups and downs of the market. Work with a trusted advisor to develop a long-term investment strategy. Strategic investment and wealth management should factor in rising inflation and market volatility. The key word is “investment,” which encompasses longevity with long-term goals. – Karla Dennis, Karla Dennis and Associates Inc.

16. Impulse Control

Cash reserves are necessary. Six months’ payroll for key roles and major expenses should always be set aside. But the best advice would be to control your impulses. We see too many business owners deplete their reserves for opportunities that “can’t lose.” Prioritize hitting those reserve goals before you let your impulses push you into taking on big, shiny investments in thriving economic times. – Kale GoodmanEasier Accounting

DISCLAIMER

Magnus Financial Group LLC (“Magnus”) did not produce and bears no responsibility for any part of this report whatsoever, including but not limited to any macroeconomic views, inaccuracies or any errors or omissions. Research and data used in the presentation have come from third-party sources that Magnus has not independently verified presentation and the opinions expressed are not by Magnus or its employees and are current only as of the time made and are subject to change without notice.

This report may include estimates, projections or other forward-looking statements, however, due to numerous factors, actual events may differ substantially from those presented. The graphs and tables making up this report have been based on unaudited, third-party data and performance information provided to us by one or more commercial databases. Except for the historical information contained in this report, certain matters are forward looking statements or projections that are dependent upon risks and uncertainties, including but not limited to factors and considerations such as general market volatility, global economic risk, geopolitical risk, currency risk and other country-specific factors, fiscal and monetary policy, the level of interest rates, security-specific risks, and historical market segment or sector performance relationships as they relate to the business and economic cycle.

Additionally, please be aware that past performance is not a guide to the future performance of any manager or strategy, and that the performance results and historical information provided displayed herein may have been adversely or favorably impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be inferred that these results are indicative of the future performance of any strategy, index, fund, manager or group of managers. Index benchmarks contained in this report are provided so that performance can be compared with the performance of well-known and widely recognized indices. Index results assume the re-investment of all dividends and interest.

The information provided is not intended to be, and should not be construed as, investment, legal or tax advice nor should such information contained herein be construed as a recommendation or advice to purchase or sell any security, investment, or portfolio allocation. An investor should consult with their financial advisor to determine the appropriate investment strategies and investment vehicles. Investment decisions should be made based on the investor’s specific financial needs and objectives, goals, time horizon and risk tolerance. This presentation makes no implied or express recommendations concerning the way any client’s accounts should or would be handled, as appropriate investment decisions depend upon the client’s specific investment objectives.

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DEFINITIONS

Asset class performance was measured using the following benchmarks: U.S. Large Cap Stocks: S&P 500 TR Index; U.S. Small & Micro Cap: Russell 2000 TR Index; Intl Dev Large Cap Stocks: MSCI EAFE GR Index; Emerging & Frontier Market Stocks: MSCI Emerging Markets GR Index; U.S. Intermediate-Term Muni Bonds: Bloomberg Barclays 1-10 (1-12 Yr) Muni Bond TR Index; U.S. Intermediate-Term Bonds: Bloomberg Barclays U.S. Aggregate Bond TR Index; U.S. High Yield Bonds: Bloomberg Barclays U.S. Corporate High Yield TR Index; U.S. Bank Loans: S&P/LSTA U.S. Leveraged Loan Index; Intl Developed Bonds: Bloomberg Barclays Global Aggregate ex-U.S. Index; Emerging & Frontier Market Bonds: JPMorgan EMBI Global Diversified TR Index; U.S. REITs: MSCI U.S. REIT GR Index, Ex U.S. Real Estate Securities: S&P Global Ex-U.S. Property TR Index; Commodity Futures: Bloomberg Commodity TR Index; Midstream Energy: Alerian MLP TR Index; Gold: LBMA Gold Price, U.S. 60/40: 60% S&P 500 TR Index; 40% Bloomberg Barclays U.S. Aggregate Bond TR Index; Global 60/40: 60% MSCI ACWI GR Index; 40% Bloomberg Barclays Global Aggregate Bond TR Index.