What you can do about inflation

How you can best invest to beat inflation

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Are you also worried about inflation? I am.

Depending on where you live your inflation rate is around 8 to 10%. How it hits you depends on how much you spend on what has increased the most. If you drive a lot, your inflation will be a lot higher.

Last week I got a letter from my gas supplier. My gas use will go up 213% from October, just when it starts getting cold here in northern Germany.

It is a shock, but it will not hit me too hard because heating makes up a small part of my expenses.

 

What about interest

If you are thinking about investing in interest bearing securities, bank deposits or bonds, forget it!

The financial crisis has added so much to the debt of countries worldwide, over 100% of GDP in the USA an 150% of GDP in Italy, that central banks cannot increase interest rates much, before these countries start running into serious problems.

This means that positive real interest rates (greater than inflation) will not occur soon, if ever again.

If you are thinking of buying long term bonds, attracted by the higher interest rate be careful. Long term interest rates have been increasing off record lows which means they can only go up.

And as you know the longer the bond maturity is the bigger the price move will be if interest rates go up.

 

What about TIPS

I have a small position of TIPS ETF but its performance so far has not been good. This is mainly because the yield on these bonds were also at record lows. When interest rate expectations increased the price of these bonds fell.

I expect that they will do better once the interest coupons are adjusted upwards for inflation but so far, it has been a losing investment for me.

 

Okay, so what can I do then?

If all these options are bad, what can I do with my money you may be thinking.

My best answer is quality, undervalued companies such as the ones we recommend in our newsletter service.

You can of course search for your own investment ideas using any of the best strategies we have tested.

 

Take small positions

If you start investing now do not put too much money to work because markets are still falling. Here are our ideas of a market crash portfolio which were included in one of our newsletters.

As I wrote to you in previous emails, start with smaller positions than usual, increase them as the market moves up. But make sure that you use some sort of way to limit your losses.

Remember with your stock market investments you want to counter the effect of inflation not make it worse by losing money.

 

Other investment ideas

Other investment ideas I like are bond like alternatives.

The best idea I have found is tobacco companies. Because of the ethical considerations (ESG) of a lot of fund managers these companies have been sold down making their dividends VERY attractive. Depending on your ethical considerations you may or may not want to buy them.

I analyzed a lot of them and in the end decided to buy a basket as I could not say which one will perform best.

 

I also bought an Oil and Natural Gas ETF to give me exposure to the record high prices. I know these companies have record profits but in spite of that investors have avoided them.

This could be either because of environmental or ethical reasons or just because they think the record profits can only go down from here.

That may be true, but high oil and gas prices may be around for longer than we know. If that is the case these companies our trading at really attractive valuations and pay high dividends.

 

Here is a link to our ideas of how you can build up a market crash portfolio:

How to start your market crash portfolio

 

Now on to the Mind Game part…

 

The Mind Game

 

Rule #7: Money’s greatest value is…

 

What do you think is the greatest thing money can buy for you?

Hint - it is not anything physical…

 

The biggest predictor of well-being

What do you think, is the greatest predictor of positive feelings and well-being?

Numerous research studies have found it is having a powerful sense of being in control of your life.

When I read that the first time, I was not convinced. But the more I thought about it the more convinced I became.

Think about it for a minute. Would you not feel happier if you had more control over being able to:

  • do what you want
  • when you want to do it
  • with people you want to do it with.

 

Is this not them main reason people play the lottery? That is too risky for me so I decided I would rather save and invest to get the same result.

 

The best thing money can buy

This means the best thing you can buy with money is not something, it is control over your time.

As you save more and your portfolio grows, you become more independent, one small step at a time. You get more control over what you can do and when you can do it.

It is the highest dividend money can buy for you.

 

Helping you get the highest return for your money

 

PS I know markets are still uncertain BUT have you already started building your buy list? If not, why not sign up today and start now.

PPS It is so easy to forget and put things off why don’t you sign up right now?