Grace Moran- Cryptocurrency
- TIPS
- Short-term bonds
- Stock
- Cash
- Commodities
- Real estate
Inflation is something we all dread because 100$ can no longer purchase the same amount of items it once did, or the astronomical price of gas prices (At an average of $4.59 per gallon as of May 19, American consumers are dealing with the highest gas prices the nation has ever seen.). It is understandable that you would want to find a secure way to protect your hard-earned money from essentially becoming worthless.
While the recent increase in prices for goods and services has been attributed primarily to the world's reopening, we don't know how long it will last or how we should react financially.
For the usual everyday spender, increased prices will mean decreased spending to cope with the hike. However, I am sure that investors will certainly be worried about their investments. So birizon with the help of some experts came up with 7 tips that will help protect your money.
1. Cryptocurrency
Bitcoin (cryptocurrency) is frequently referred to as "digital gold," and because of its limited supply, gives it the very advantage to hedge against inflation. However, you need to consider the extreme volatility nature of the market which can extremely affect your portfolio. There are several ways to avoid these :
Play the long game and HODL: leaving your investment alone for months or even years at a time could offer you the best rewards
Crypto savings account: By providing a secure and flexible saving platform, crypto-earning platforms allow investors to earn interest on their assets. A savings account allows you to earn a good rate of return on your crypto investment over time, such as Birizon’s savings account which offers an amazing 0.11% daily return.
Invest in Stablecoins: Convert some of your (potentially volatile) crypto holdings to assets with a stable value. Stablecoins are a type of cryptocurrency that is tied to a fiat (stable) currency like the US dollar or even gold. it’s generally considered a less volatile cryptocurrency.
2. TIPS
Treasury Inflation-Protected Securities (TIPS) are securities that are protected against inflation. TIPS is a relatively simple concept, despite the fact that the term may appear to be a bit hard to pronounce.
TIPS are government bonds that move in sync with inflation. As a result, when inflation rises, so does the interest rate paid. Interest rates fall when there is deflation.
TIPS are one of the safest investments you can make because they're backed by the US government. They're also a good way to diversify your portfolio while boosting future retirement income.
TIPS are pretty predictable because it moves in line with the consumer price index (a measure of consumer prices paid over time) which helps protect them against any unexpected spikes in inflation.
TIPS bonds pay fixed-rate interest twice a year and have maturities of 5, 10, and 30 years. At maturity, investors are paid either the adjusted principal or the original principal, whichever is greater.
3. Short-term bonds
Investing in short-term bonds is a similar strategy to keeping cash in a CD or savings account. Your money is secure and easily accessible.
Furthermore, if rising inflation leads to higher interest rates, short-term bonds will outperform long-term bonds. As a result, Birizon advises sticking with short- to intermediate-term bonds and avoiding anything long-term focused.
4. Stocks
Stocks can be good as a long-term inflation hedge but can suffer in the short term if inflation spikes.
If you’re new to the investing world, it’s easier than ever to get started. To do so, you’ll need to open an account through a brokerage or trading platform. Select online brokers that offer zero-commission trading to find the best options for new investors. The top brokerages for free stock trading have the widest range of investment options, user-friendly technology, quality customer support, and educational resources.
Here are our top Seven selections :
- TD Ameritrade
- Ally Invest
- E*TRADE
- Birizon (although it makes use of AI machines to trade and gives you the profit)
- Vanguard
- Charles Schwab
- Fidelity
Birizon cautions investors to keep in mind that current inflation issues may be temporary, so don't make drastic changes to your portfolio that could harm performance if inflation falls.
5. Cash
When it comes to inflation protection, cash is frequently overlooked.
While cash is not a growth asset, it usually keeps pace with inflation in nominal terms when inflation is accompanied by rising short-term interest rates.
Keep some cash in a high-yield savings account, money market account, or CD.
6. Commodities
Prices for raw materials such as oil, metals, and agricultural products typically rise in unison with inflation, making them a good hedge against it.
However, investors should be aware that commodities can be extremely risky. Commodity prices are heavily influenced by supply and demand, which can be highly volatile. This makes them a risky investment, especially since investors are using leverage: the possibility of rewards is high, but so is the risk of losses.
7. Real estate
Historically, real estate has done well during periods of higher inflation because the value of a property can rise. This means your landlord can raise your rent, increasing their income and keeping it in line with rising inflation. Birizon offers a wide selection of house listings to start if you want to own the house personally or simply invest in the real estate investment plan.
Beyond home ownership, real estate investments can be made through REITs (also known as Real Estate Investment Trusts) or through mutual funds that invest in REITs.
Conclusion
Investors have many options to protect themselves against inflation, but the safest bet is through TIPS or crypto-savings accounts like Birizon. Otherwise, use an inflation surge period as a good time to review your overall investment performance and allocation to make sure it aligns with your goals.
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