Most people are so preoccupied with the task of making and saving money that they overlook something simple like inflation when developing a long-term wealth strategy. Inflation causes currency to depreciate, which means that the money you earn and save today will not be worth as much ten years from now. Fortunately, there are many ways to counteract inflation with the right investments and financial decisions. Dmitriy Aksyonov, President of Global InterGold, stopped by to chat about a few tips that can help protect your wealth from the harmful effects of inflation:
1. Store a Portion of Your Wealth in Precious Metals
Any money that is stored in a conventional bank account is subject to the effects of inflation, whereas precious metals like gold are known to hold their value over long periods of time without depreciation. “While most experts recommend holding at least 3% of your investment portfolio in gold, we advise a higher percentage of 10% or more to ensure that the investment stands up against inflation against the context of your entire portfolio,” said Dmitriy Aksyonov.
2. Invest in a Managed Fund
A managed fund gives you a curated portfolio of stocks, which provides a more consistent return than investing in the stock market independently. For example, the S&P 500 index fund lets you invest in the stocks that make up the S&P 500 stock index. “Since managed funds are handled by professionals and the investments are diversified, these are always wise investment vehicles to include in a well-rounded portfolio,” added Mr. Aksyonov.
3. Invest in Real Estate
Real estate is usually a good investment because not only does it tend to increase in value over time, it can also provide an additional revenue stream in the short-term. Furthermore, any revenue generated with real estate will keep up with the pace of inflation because as inflation rises so do rent and property prices. “Every high-level investor should look into investing in at least one or two pieces of real estate,” Dmitriy confirmed.
4. Make Regular Contributions to High-Yielding Savings Accounts
A typical savings account is a good start, but eventually you’ll want to consider ways to increase the return you’re getting. Opening a high-yielding savings or checking account with a credit union or holding funds in a CD ladder are good options for helping your savings grow automatically to offset some of the effects of inflation. “It’s also wise to increase the frequency of automatic deposits made to your savings as a matter of enhancing your financial discipline,” Dmitry recommended.
Inflation is Inevitable
Regardless of whether you take action or not, one thing is for sure – inflation will happen, and it will reduce the value of any wealth that you have stored in traditional currencies. However, that does not mean you have to sit by and watch it happen, as taking some of the steps above can help you preserve and increase the value of your savings in any economy.