Inflation Protecting your Portfolio
On this week’s episode of the Wiser Roundtable podcast, the team provides commentary about inflation and how to protect your portfolio.
Listen on Apple Podcasts or watch on YouTube:
Summary:
The team starts the podcast by discussing the basics of inflation, and how it is simply defined as the change in prices of goods and services that are bought by your average consumer. The cause and effect of inflation has changed over the past 20 years largely due to the rate of adoption of technology.
A threat to investors is that the cost of living continually goes up with inflation. People typically have pay increases every year to keep up with inflation. When planning for retirement, it is critical to plan and save with inflation in mind.
There are a number of securities designed to protect a portfolio from inflation. For example, Treasury Inflation-Protected Securities (TIPS) are designed to match the rate of inflation through the return you receive over the lifetime of the security itself.
Bond portfolios and inflation generally do not mix well. Bonds are not going to be able to keep up with purchasing power. Commodities are not a long-term healthy asset class. However, commodities are in a portfolio in order to benefit from the appreciation of their price over time. Bitcoin is discussed as a way to potentially hedge against inflation, but it is tough to say whether Bitcoin will keep up with inflation.
Common stocks initially react negatively to inflation. Common stock investors receive dividends, and rising dividends over time offset inflation. The price increase in the stock market is more than enough to keep up with inflation. Real estate is another hedge against inflation. Real estate forces you to be a good investor. If there is a change in the market, people can’t sell overnight, there is a process they have to go through.
Timestamps:
0:00 Introduction
2:33 What is inflation?
5:50 How has technology affected inflation?
8:30 How does inflation affect the cost of living?
14:00 How to protect your portfolio?
17:00 Bonds
18:38 Commodities
23:27 Is Bitcoin a hedge against inflation?
25:00 Common stocks
30:30 Real estate
Links:
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