How to invest during inflationary times

You are definitely not alone if you feel like everything from food to tech products are becoming more expensive.

According to a joint media release from Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI), Singapore’s overall inflation for December 2021 shot up to 4% on a year-on-year basis - a nine-year high.

It is seemingly worse in countries like the United States where consumer prices rose to 7% - the highest U.S. inflation rate in almost 40 years due to strong customer demand and ongoing labor and supply shortages.

With inflation unlikely to abate anytime soon, the important question begets: “Where should investors put their money at during inflationary times like this?”.

Hence, to answer this question, we have put together 3 investment types that can hedge against inflation below.

1. Commodity-linked Stocks

When most people think of investing, they usually think of asset classes such as stocks and bonds. But you can also invest in tangible goods and substances which are known in the financial world as commodities. They are publicly traded tangible assets often made up of the things you use or consume every day like grains, gold, beef and gasoline.

Commodities are physical goods so their value typically rises along with other climbing prices aka inflation while the value of a dollar shrinks.

One classic example is the oil price which has ballooned together with the global economic revival. At the time of writing, WTI crude oil price is trading at US$92.21, almost 40% higher from US$66.67 just in December 2021. This has benefitted Oil and Gas related stocks like Nordic Group and Rex International.

2. Cashflow Positive Stocks

During high inflation environments, governments worldwide have little choice but to increase the interest rates to put a brake on the escalating inflation rates.

In turn, growth tech stocks have tumbled double digits over the past few months and investors have been flocking to Cash, the safe asset during such uncertain times.

With that notion in mind, investors can also check out for dividend paying, blue chip companies. The benefits are two-fold:

1) Dividends can act as a safety net and the source of cashflow for averaging down and

2) mMature blue chip firms like Starbucks and Apple can provide the peace of mind when mayhem breaks out.

3. Gold – the alternative currency

The yellow metal (Gold) has always been a safe-haven asset for investors when inflation revs up or interest rates are very low.

Based on past records, gold tends to perform well when inflation rate exceeds the rate of interest. On another note, investors often view gold as a store of value during tough economic times, and it has succeeded in this purpose across history.

For a simple way to invest in gold, investors can do so through an ETF namely SPDR Gold Shares ETF as it reflects the performance of the price of Gold bullion, less the trust’s expenses of 0.4% per annum.

Conclusion

Rising interest and inflation rates are something that investors should watch for now as they can put a significant dent in the global economy’s growth.

On the other hand, this tricky situation may also provide an opportunity for investors to scoop up stock bargains along the way or to simply pivot to safer assets as mentioned above.

More than 3,600 investors are on our Telegram, what are you waiting for? Join us now for more first-hand updates, articles, events, promos and happenings. Click here now. See you on the inside.