The rise in prices on goods and services over the last few months has been attributed to the world opening up and regaining its progress towards normalcy. However, despite our rationalised understanding, this can be an emotionally draining period for consumers and investors alike; as we will not know exactly how long this inflationary phase will last or what impacts it will have on the future and our investments.
In the United States, the Labour Department’s consumer price index climbed 8.5% over the 12 months to a four-decade high not seen since December 1981.1 In our local contest, Singapore’s central bank tightened its monetary policy on for the third time since October 2021 in a double-barrelled move to combat inflation that is expected to heat up.2
Inflation is an opportunity for the well prepared. Since it will happen anyway, think of it as the “golden time” to re-examine and rebalance your investment portfolio.
Look for companies that can raise prices relatively easily
without compromising other business aspects. The investing mogul himself, Warren Buffett, has been a loyal supporter of investing in businesses with low capital needs, particularly during times of inflation. In his words, “a brand is a wonderful thing to own during inflation,” which for him, includes brands like See’s Candy, which he has owned since 1972.
Having too much cash on hand is almost as bad as having too little.
Why so? Cold hard cash does not have any hedge against inflation. If you are someone who has always preferred to hold on to cash – beyond what you might need for an emergency fund – it is high time to consider investing a part of it. Whilst the market might not be looking great now, over the long term, your investment could bring you better gains than it would in a savings account.
By investing too aggressively on a short time horizon, you might not have enough leeway to recover from market volatility. But if your portfolio is too conservative, it might not grow your money adequately for the future.
Achieving the right balance is key to staying ahead of inflation. Speak with me to find out how you can diversify your portfolio to suit your exact needs and goals.