How to invest in times of inflation?

Ratio inflationary has continuously increased in recent times in many countries. In the US, the price index consumption rose to a 40-year high. The UK also recorded the highest inflation rate in 30 years. Inflation in Canada also set a new record high, the highest since August 1991. The high prices of all kinds of goods, from fuel prices to input materials for many essential goods, make many households feel difficult and pressured.

“Many investors haven’t experienced inflation like the last few months, so it might be a good time to review your portfolio and confirm if you still feel confident,” he said. Naveen Malwal, portfolio manager at financial institution Fidelity Investments based in Boston (USA), said.

How to invest during inflation is the concern of many investors (Image: Getty).

Still, there are some assets that tend to perform well during periods of high inflation. According to a study by Wells Fargo, of the 15 major asset classes that have seen inflation since 2000, the ones that have performed well include oil (returns of 41 percent), followed by share Emerging markets (18%), gold (16%) and cyclical stocks (stocks whose prices are affected by macroeconomic changes) also have returns of 16%. In addition, there are several types of bonds.

In a tweet last weekend, billionaire Elon Musk – Tesla CEO – said that in times of high inflation, it is better to own material things like a house or stocks in good companies than to keep them. cash.

The world’s richest billionaire also cited the investment advice of legendary investor Warren Buffett that has given in the past. Accordingly, in 2009 at the end of the Great Recession, billionaire Buffett said at the annual shareholder meeting of the Berkshire Hathaway corporation, which he founded and manages, that one of the best ways to fight inflation Phat is part ownership of “a great business”. Because no matter what happens to value for money, that business’s product is in demand.

As an example of his own investment, billionaire Buffett said: “If you hold shares of Coca-Cola Company, you will receive a portion of the fruits of your labor for 20 years or 50 years for the investment. your investment. No matter the price, it won’t make a difference”, because people are still willing to buy products they like.

The higher the inflation rate, the faster cash depreciates, but investments in good, stable businesses typically grow over time. That’s why in times of high inflation, both Musk and Buffett recommend investing in stocks of strong companies, which are likely to increase product prices in line with inflation.

However, it’s important to remember that picking stocks can also be risky. Because even if a company has performed well in the past, there is no guarantee that its stock will increase in price in the future.

As a result, many experts, including Buffett, recommend investing in low-cost, low-volatility index funds that still take advantage of market growth. Because these funds hold stocks in the index, the investment is naturally more diversified.

In fact, over the years, growth in the S&P 500 index, which includes companies like Amazon, Apple and Microsoft, has outpaced inflation. “Be persistent in buying the S&P 500 low-cost index fund. Continue buying in both good and bad markets, especially during tough times,” Buffett advised in 2017.

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