Financial Intel Monthly

Stocks and Inflation

Mar 9, 2021 1:15:00 PM / by The Retirement Group

person writing on brown wooden table near white ceramic mug

Stocks are not an ideal short-term hedge against rapidly increasing inflation, but bonds are worse. Bonds are promises to pay in dollars, and those dollars are fixed unless you hold Treasury inflation-protected securities or other IOUs that adjust their payments with changes in the general level of prices. In an inflationary environment, investing in short-term bonds is better than investing in long maturities; as inflation rises, you can take advantage of rising interest rates.

 

"The closer you get to retirement, it might be wiser to increase the allocation to income producing investments over more volatile investments." person holding black and brown globe ball while standing on grass land golden hour photography

 


Gold and commodities also do well in periods of high and increasing inflation. But, like bonds, they have poor results over the long term. Gold, for example, has returned only 0.7 percentage point per year more than inflation over the past two centuries.

Retirekit CTA

A strategy for insulating your stock portfolio against inflation is to diversify internationally. If inflation kicks into overdrive, the dollar will fall and foreign stocks will act as an automatic hedge as money invested in foreign currencies is translated into more dollars back home. But don’t run to speculative assets that will deflate in price when inflation slows. For long-term investors, stocks may be an excellent hedge against rising prices.

 

If you are interested in more information about this topic, view our e-book here: https://retirekit.theretirementgroup.com/effects-of-inflation-e-brochure

 

 

This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, Alcatel-Lucent, AT&T, Apache Corporation, Altria, Avaya, Baker Hughes, Bayer, Boeing, BP, Bristol Myers Squibb, Chevron, Concho Resources, Hughes, fidelity.com, Wyeth, Northrop Grumman, Merck, Raytheon, Coca-Cola ,Qwest, Pfizer, Caterpillar, ConocoPhillips, ExxonMobil, Sempra Energy, San Diego Gas & Electric Company, Southern California Gas Company, Ameren, Anheuser-Busch, APL, Bank of America, Blackhawk Networks, Caterpillar, CenturyLink, Chevron, Citigroup, Clorox, Coca-Cola, Colgate, Con Edison, ConocoPhillips, Dexone, ExxonMobil, GlaxoSmithKline, Halliburton, Hewlett Packard Home Depot, Honeywell, HP, IBD, Johnson Controls Kaiser Permanente, Kimberly-Clark, Kinder Morgan, Lockheed Martin, McCormick Spice, Merck, Monsanto, Northrop Grumman, Occidental Petroleum, Pepsi, Pfizer, PG&E, Phillips 66, Phillip Morris, Qwest, Raytheon, Royal Dutch Shell, Safeway, San Diego Gas & Electric, Schlumberger, Scotts Miracle Gro, Sempra, Siemens, SoCal Edison, Sony, Southern California Edison, Teradata, Toyota Motor Corporation, Tropicana, United Parcel Service, Verizon, We Energies Group, Wisconsin Energy, Wyeth, Verizon or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with FSC Securities and may be reached at www.theretirementgroup.com.

 

TRG Guide

Tags: CAM Annuity, Chevron, ERB, ESRO, ExxonMobil, Financial Planning, Hewitt, In Service Withdrawal, Lump Sum, Northrop Grumman, Option 1 Withdrawal, Pension, Pension Options, Retirement, Retirement Planning, Verizon, 401K, 72t, Age Penalties, Benefit Commencement Date, Workshops, TRG

Check the background of this investment professional on FINRA BrokerCheck

TRG Guide

Subscribe to Email Updates

Lists by Topic

see all

Posts by Topic

See all

Recent Posts