Insights

There are many factors that are contributing to global inflation, and high-earning investors are working to protect their wealth by making smart investments. This article covers the current state of inflation, how you can fight inflation with smart investments, and how Alpen Partners can help.

Inflation in 2022

The most basic downfall of inflation is the rising prices of goods and services. As the value of the dollar decreases, the average consumer will be able to afford less, changing purchasing habits, which can lead to a decline in the success of a market. In 2022, high inflation has hit many parts of the world, leaving many concerned with the future of the world’s economies. Between May 2020 and May 2022, inflation rose 5%. The biggest reason for this is the Covid-19 pandemic that drastically changed spending habits. For example, airlines and hotels cut back on many services, laid off a large portion of their workforce, and cut prices. As we continue through 2023 and restrictions are being lifted, prices of these services also went up. On the other hand, some industries saw a lot of popularity during the pandemic, such as exercise, that are expected to decline. Luckily, experts believe these high prices won’t last long. While this hopeful outlook is relieving, the truth is it’s not always easy to predict the future of the economy. As a result, many high-earning investors are preparing their portfolios for the worst. It’s never a bad idea to prepare your portfolio for inflation.

How to Fight Inflation

With economic uncertainty and high rates of inflation, how does an investor prepare to weather the storm? The best thing an individual can do is diversify their portfolio with investments that perform well in times of inflation. These investments may not be subject to the same market risks that some investments are. Or they may even perform better in times of inflation, which is the case with gold. For more guidance, contact our experts at Alpen Partners. We work with our clients to determine the best hedge investment for your portfolio and your goals.

1. Real Estate
   Purchasing real estate is a great way to diversify a portfolio, especially if it’s held in an international location. When an investor makes an offshore real estate purchase, they can combat a lot of market risks they face with their domestic investments. It’s also easy for an investor to make an international real estate investment, making it the perfect introduction to international markets. U.S. real estate is especially popular right now. Our clients who only have portfolios with only domestic investments will purchase real estate to expand their reach and protect themselves against market risks. In addition, real estate is often used in times of inflation as a source of income. As prices rise, landlords can charge more for rent. This means any losses from inflation are covered. REITs are another way for investors to take advantage of the perks of real estate. A REIT is a company that owns and operates income-earning real estate and can be found on major stock exchanges.
   
   
2. Gold, Precious Metals, and other Commodities
   Commodities are raw materials to be consumed directly, utilized in industry, or used as a material in other ways, such as precious metals. For years commodities have been used to strengthen portfolios and combat inflation — one of the most popular commodities in which to invest in gold. Gold is the best hedge against a stock market crash, and the price of gold increases dramatically after a crash. Even during the 2008 financial crash, investors left behind the declining stock market and began buying gold again. The price of gold typically rises and falls with the cost of living. Gold isn’t the only precious metal attractive to investors since silver and platinum have many industrial uses in most major industries, so it has become quite popular among investors.
3. High Performing Currencies
   Other commodities include water, agriculture, base metals, and energy. Most commodities have a relationship with inflation, where the value of commodities can indicate inflation is on the horizon. When the price of commodities goes up, so do the prices of the products the raw materials are used to make. People can invest in commodities through directly purchasing raw materials or by utilizing future contracts of ETPs that track a commodity index. Some of our clients have used mutual funds or bought shares of a company that earns capital through natural resources.
4. High Performing Currencies
   If you don’t want to hold onto your cash that is declining in value, it’s always an option to purchase a currency that is performing well. For example, a lot of our clients will invest in the Swiss franc (CHF). Switzerland’s strong economic system with controlled requirements and slight growth makes the franc very appealing for investors from more tumultuous economies. Americans benefit greatly from this investment option because of the low short-term volatility in the exchange between the CHF and USD. One way to invest in currency is through the forex market. You buy and sell currencies at the current rate. An exchange rate is the price of the currency as it compares to another. Exchange rates are primarily expressed in USD since the U.S. currency dominates the financial markets.

Fighting Inflation with Alpen Partners

If you are looking to create a strong portfolio and combat inflation, connect with the professionals at Alpen Partners. Our team will work with you to determine the best investments for you by looking at your current investments and making suggestions based on your needs. Once your portfolio is built, we won’t leave you hanging. We will work with you to monitor and manage your investments, keeping an eye on the world’s ever-changing economic situations.

A successful wealth management plan involves many factors that simply cannot be maintained by a single person, especially for our high-earning clients. Our experts are skilled in advising on investments listed above and much more, and we have strong relationships with banks that cater to high-earning clients.

All investments involve certain risks. All investments carry the potential for financial loss, including the loss of the principal amount invested. Past performance should not be viewed as an indicator of future results.

Market conditions and broader economic factors can significantly impact the value of investments. Investments in international markets are subject to additional risks, such as currency exchange fluctuations, political or economic instability, and variations in accounting practices. Alternative investments, including but not limited to hedge funds, private equity, and real estate, may be illiquid, speculative, and are not suitable for all investors. The above information should be considered before making any investment decisions. All posts and publications are for your information only and are not intended as an offer, promotion, or solicitation to buy or sell any financial instrument or perform any other financial transactions. All information and opinions expressed in posts and publications reflect our current views as of the date of the publication and may be liable to change without notice.