By Jeffrey Meenes, CFP® (Published Date May 4, 2023)
Inflation is a general rise in prices over time, which means that the purchasing power of money decreases. Since 1925, inflation has averaged roughly 3% per year. This means that a dollar today is worth about 44 cents in 30 years. This may not seem like a lot, but it can have a significant impact on your finances over time. For example, if you have a million dollars saved for retirement, and inflation is 3%, your million dollars will only be worth about half a million dollars in 20 years.
The best way to protect your money from inflation is to invest it in assets that will appreciate in value over time. Some good options include stocks, bonds, real estate, and commodities. One of the greatest risks you can take with inflation is to ignore it. All too often investors do ignore inflation until it rears its ugly head and takes a serious bite out their nest egg.
It is also important to diversify your investments, so that you are not overly exposed to any one asset class. For example, if you invest only in stocks, and the stock market crashes, you could lose a lot of money. By investing wisely and diversifying your portfolio, you can protect your money from inflation and reach your financial goals.
Here are some additional tips for investing in times of high inflation:
- Invest in assets that produce income, such as stocks and bonds.
- Maintain an update financial plan and rebalance your portfolio regularly to ensure its aligned with your risk tolerance and goals.
- Stay informed about economic conditions and inflation trends.
- Consider investing in other inflation-protected assets.
Weathering high inflation periods can be difficult for investors, but sensible strategies and careful management can help you maneuver through this uncomfortable period and still achieve your financial goals.
This content is developed from sources believed to be providing accurate information, and provided by Meenes Wealth Partners. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.