controlling inflation

Top 5 Methods of Controlling Inflation

INFLATION!! The hottest topic of 2022 in almost every part of the world.

As we all know, the world’s growing economies are experiencing high inflation rates post-COVID. 

Investors all around the world are concerned about the increasing inflation globally and are trying to figure out several methods of controlling inflation.

Now you might be wondering, what does inflation have to do with investments and stock markets?

Well, on that note, you need to understand that inflation and stock markets are deeply connected. The impact of inflation on the stock markets is quite significant.

But before proceeding further, we need to understand what high inflation means.

What does high inflation mean?

The continuous rise in the prices of goods and services is referred to as inflation. When the cost of goods rises at a faster rate than usual, by 10 or 15% per year, this is referred to as high inflation.

Returning to the matter at hand, inflation is killing your money and savings, earning the title “silent killer.”

Though as individuals we can’t do anything about the silent killer (rising inflation), here are some words of wisdom to deal with it:

Methods of controlling inflation

When inflation rates rise, there are chances that the stock market and other risky asset classes will crash. Hence, it’s advisable to invest in risk-free assets to avoid any mishaps. Here are some methods of controlling inflation by investing in safe assets:

1. Invest in Real Estate

The long-term value appreciation of real estate makes it a good inflation hedge. Real estate has kept rising in value despite certain historic downturns and losses during the 2008 global financial crisis.

Another benefit of investing in real estate is that it can perhaps provide some consistent rental revenue from residents. 

Landlords gain when property values rise since increasing rents are a common result of rising property values. 

Additionally, this recurring income might assist property owners in surviving market downturns.

In certain contexts, real estate investors may also be eligible for considerable tax deductions. This covers long-term capital gains, deferred taxes, cost depreciation, and expenditure deductions.

2. Invest in Bonds

Bond investing may seem illogical given that fixed-rate debt often suffers from inflation. However, that isn’t the case with inflation-indexed bonds, which provide a variable interest rate based on the rate of inflation. Smart investors often choose Treasury Inflation-Protected Securities (TIPS), which are indexed to the Consumer Price Index.

There are several ways to access inflation-indexed bonds. For instance, direct investments in TIPS may be made through a brokerage account. They are also maintained in a few exchange-traded funds and mutual funds. 

3. Invest in Gold

Gold is undoubtedly one of the greatest methods to diversify your portfolio. As the economy starts to fall, gold’s value rises. As a result, gold is regarded as the safest form of investment during unfavorable economic times.

Nowadays, with increasing globalization and advanced technology, you can now invest in gold in a variety of ways.

Due to its scarcity and solid demand, gold is regarded as a very effective long-term hedge against currency inflation. It has consistently performed better than inflation rates. As a result, having gold in your portfolio can help you manage risks and prevent severe losses.

4. Invest in Stocks

Last but not least, there is our stock market!! Stocks have a decent chance of holding up against inflation, but not all stocks do equally well in this regard. For instance, in inflationary times, high dividend-paying equities sometimes experience the same kind of heavy losses as fixed-rate bonds. 

However, on the other hand, investing in blue-chip stocks is considered the best decision, as well-established companies like TATA, Reliance, etc. have low chances of falling. As the price of the stocks falls during economic downturns, it gives a great opportunity to buy growth stocks at low rates.

Reduce Inflation

Investors should concentrate on the business of the company. It is important to invest in fundamentally strong stocks with proper research.

As previously stated, inflation is a silent killer, and if you do not take action to counter inflation, it will one day steal your wealth. 

Therefore, rather than storing your money in a bank account or a personal locker, it is wiser to invest in assets that can outperform inflation and provide a reward.

That’s all I have to say; I hope you enjoyed reading this useful piece of information. 

Please feel free to comment below and let me know if you have any queries or believe that I may have overlooked something important.

It’s never too early