Investors around the world are at the whim of the adverse effects of inflation. To hedge against the decreasing value of the dollar, investors need to plan appropriately. In this article, we look at five assets an investor can invest in to protect themselves against inflation and how our experts can maintain your wealth and grow your portfolio.
As time goes on, the dollar’s value decreases; therefore, an amount of money today will afford that same amount of goods over the years. This is because of inflation. Inflation is used to measure the value of goods and services within an economy. The level of inflation changes because of current events. Political, economic, and other factors can significantly affect inflation, but it is a natural occurrence in the market economy. As the globe recovers from the effects of Coronavirus, investors are feeling the hurt of inflation. Below we summarize some of the ways our clients are hoping to recover.
Investments for Fighting Inflation
There are many ways to hedge against the effects of inflation, including investing in assets that remain valuable in times when inflation is negatively affecting the market. Below we have outlined five different asset classes you can invest in to help buffer, or hedge, against inflationary climates. Of course, there is no such thing as a perfect investment, so investing in one of these assets will not promise complete protection against inflation. Diversification is the biggest key to hedging a portfolio. Also, the guidance of a professional has proven to increase success in wealth management.
Gold is a proven way to protect your portfolio against inflation. While gold is considered a commodity, which will be covered below, it deserves to have its own spotlight as a top fighter of inflation. It is a physical asset and typically holds its value. The material has a long history of being used as a form of currency and is much older than other classic investments such as stocks and bonds. Today, gold is an excellent way for investors to grow their portfolio or protect themselves from inflation. Historically, gold is one of the best hedges against a stock market crash, evidenced by the dramatically increasing price of gold after an economic crash. In fact, investors were leaving behind the dropping stock market and began repurchasing gold during the 2008 financial crash. The price of gold will also usually rise and fall with the cost of living. Further, gold isn’t the only precious metal used to fight inflation. Silver is also very popular as it has many industrial uses, and it’s easier to buy and sell smaller quantities.
- Swiss Franc
Many investors will place a portion of their wealth into purchasing another country’s currency to fight inflation. One of the strongest global currencies today is the Swiss franc (CHF). The franc is the national and only currency offered in Switzerland. Historically, the franc has outperformed other currencies due to a robust national economy with controlled requirements and slight growth. The franc’s value has continued to grow over the value of the US dollar and the Euro because of the European debt crisis and monetary policy in the United States. This makes the franc attractive to investors from these more tumultuous economies. With a robust financial system and a competitive economy backing the franc, investing in the currency proves to be an intelligent decision.
A commodity is a raw material that is to be consumed directly, utilized in industry, or is used as a material in other ways, such as precious metals. Water, agriculture, base metals, and energy are also considered commodities. Like gold, commodities as a whole have been used for generations as currency. Ancient civilizations entirely relied on the trade of raw materials to fuel their economies. Today, investing in commodities has become more civilized and has been used to fight one of the biggest threats to investors, inflation. Commodities have a unique relationship with inflation in that commodities can indicate inflation is on the horizon. When the price of commodities rises, so do the prices of the products the raw materials are used to make.
You can invest in commodities in several ways, such as raw physical form or using future contracts of ETPs that track a commodity index. Others have used mutual funds or bought shares of a company that earns capital through natural resources.
A real estate investment trust, or REIT, is a company that owns or finances income-producing real estate in multiple sectors, often traded on major stock exchanges. When inflation rises, property prices and income from rentals tend to rise.
- Income from Real Estate
Investing in real estate is a great way to invest in foreign economies, holding wealth in offshore locations, and even fight against inflation. Earning income from rental properties works well because when inflation rises, so does the amount an investor can charge in rent. The increase in earnings combats losses due to market volatility.
Investing with Alpen Partners
Alpen Partners, with the help of strong partnerships with leading Swiss private banks, offers expert investment guidance, wealth management, family office, and personal services to high-earning investors. If you are worried about rising inflation rates, connect with our team to determine the investments that will work with your portfolio to combat adverse effects. We have expertise in all of the investment classes listed above and so much more! Alpen Partners has connections with some of the most prestigious banks in Switzerland that have trustworthy reputations for managing wealth and some holding your gold, Swiss Francs, and other investments. Our goal is to find the best investment opportunity for you, whether it’s used to fight inflation or otherwise.