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When it comes to investing in stocks, one of the key considerations is how to protect your portfolio against inflation. Inflation is one of the biggest threats to your portfolio. It is especially crucial in today’s environment where we are seeing historically low-interest rates and concerns about future inflation. Countries like the USA are witnessing inflation of 8.5% in July 2022, in the UK it has increased to 9.1%, India at 7%.
Over time, inflation can eat away at the value of your stocks, leaving you with less and less money. That’s why it’s critical to take steps to protect your stocks against inflation. By investing in stocks that are resistant to inflation, and by diversifying your portfolio, you can help safeguard your money against the ravages of inflation.
Five ways to make your stock portfolio inflation-proof
Invest in companies with robust fundamentals
Investing in companies with the necessary fundamentals is one of the best ways to protect your portfolio against inflation. By investing in companies with strong balance sheets, solid profitability, and healthy cash flow, you can help ensure that your portfolio will maintain its value over time. To understand the graph better, you can use a stock tracker app. The application will help you get to know the stocks that are beneficial and identify the volatile stocks in your portfolio.
Diversify your investments
When it comes to investing, many people think of stocks and bonds. However, there are other options out there that can help you diversify your portfolio and make it inflation-proof. Commodities, for example, are a great way to hedge against inflation. Gold, silver, and oil are all commodities that tend to go up in value when inflation is high. Real estate is another asset class that can be a good inflation hedge.
Focus on companies with pricing power
Inflation is one of the most feared economic events by investors. It can erode the value of investments, as well as, eat away at company profits. To ensure your portfolio is inflation-proof it’s essential to focus on companies that have pricing power. It means that they can increase prices without losing the demand for their products or services. Here are a few examples of companies that have this type of pricing power.
Hold some cash and short-term investments
As inflation rates continue to inch up you may be wondering how to protect your portfolio. One strategy is to hold some cash and short-term investments. It can help to hedge against inflation and make your portfolio more resilient. Over time, inflation can erode the value of your investments. While cash may not offer much in the way of returns, it is a very stable investment. Short-term investments, such as Treasury bills, are relatively stable and can provide higher returns than cash.
Stay invested for the long term
Over time, the effects of inflation will be negated by the natural growth of the economy and corporate profits. By staying invested for the long term, you can ride out any short-term fluctuations caused by inflation. To stay on track and know your investment value, you can utilize Delta App to help you make smart moves even in the long run. It guides you to make the most viable investment strategy and track all your money outcomes.
