When it comes to building real wealth, rates of return matter. Both the amount you earn on investments and the amount you save for retirement are important. However, inflation is often overlooked. Inflation is a silent threat to any portfolio. Today, with inflation higher than we’ve seen in many years, you need to structure your portfolio in a way that keeps up with inflation and beyond. In this article, we’ll go over how the most successful retirees build wealth while navigating inflation. Be sure to read the whole article for a little-known tip on staying ahead of inflation!
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Diversification is Key
One of the top ways to stay ahead of inflation is to diversify your portfolio and your assets. While diversification is an overused word in the financial world, it is extremely important. It’s crucial to hold assets that aren’t correlated, so some rise or remain stable even when the market declines.
Most investors have a mix of small-, mid-, and large-cap stocks, along with some international stocks and bonds. While that’s a great start, it may not be true asset-class diversification. For instance, in 2022, both the stock and bond markets fell by 10-40%, making it seem as though nothing was working. Ask yourself what other asset classes could have been going up. Things like real estate, metals, digital currencies, and other areas can further diversify your portfolio.
In 2022, there weren’t many safe money options. Bank rates, CD rates, money markets, and the like weren’t competitive. It almost felt as though we were forced into the market. However, with increased interest rates, there are more options than there have been in years. With diversification, you need to have assets that may increase when mainstream investments are going down, since inflation doesn’t stop.
Today’s high-interest rate environment is more competitive than it’s been in years. From money markets to multi-year guaranteed annuities and CDs, there are lots of ways to have a core position in your portfolio that could rise when the rest of the market is going down. This is a way that many successful retirees manage the risk they’re holding in the market overall.
Invest in Inflation-Resistant Assets
In addition to diversification, you’ll also want to have inflation-resistant assets. Historically, stocks, ETFs, and other equities have outpaced inflation, making them valuable portfolio assets. Real estate, gold, other metals, and digital currencies have also shown resilience and may offer a hedge against inflation. As you can see, there are many options for inflation-resistant assets.
However, our main takeaway for outpacing inflation is to maintain focus on a long-term investment strategy. Although you’ll have up and down years, equity markets have historically outpaced inflation. Attempting to time the market or making emotional decisions can severely impact your portfolio’s long-term success.
If you want to learn more about inflation and how it impacts investors, watch this video from REAP Financial!
Inflation-Resistant Wealth Planning in Austin, Texas
Looking to build wealth while managing the impact of inflation? At REAP Financial, our team of fiduciary advisers specializes in crafting diversified, inflation-resistant portfolios for high-net-worth individuals and families. We help you identify investment options that align with your goals and mitigate inflation risk, creating a solid foundation for long-term growth.
Based in Austin, Texas, REAP Financial offers comprehensive financial planning tailored to the needs of our clients. Schedule a complimentary consultation today to discuss strategies for building wealth and staying ahead of inflation with confidence.
Contact REAP Financial
Email: admin@reapfinancial.com | Phone: (512) 249-7300
Office Address:
9414 Anderson Mill Rd #100
Austin, TX 78729
