5. Be strategic with savings
Rising prices aren’t the only negative effect of high inflation: it can also mean earning less interest on your savings. If you’re worried about the volatility of investments or don’t like the variable rates of high-interest savings accounts, consider a Guaranteed Fixed Index Annuity. With an FIA, your money will be locked away for a period of time (ranging from a few months to several years) but the interest rate is fixed. While some of your investment earnings may decrease during periods of high inflation, an FIA will accrue interest at a consistent rate and protect the principal value of your money.
Additional inflation-protection tools
Now for those who are more investment savvy that still want to protect their basic wealth and want some potential upside tools, here are few items to consider for your portfolio.
* These are general areas to consider and not specific investment recommendations, which should be chosen with the help of a licensed investment advisor. 1st Capital can assist you in determining what is appropriate for your investment portfolio.
1.TIPS
TIPS stands for Treasury Inflation-Protected Securities. I get it, the term may seem like a mouthful, TIPS are actually quite simple to understand. I believe TIPS are by far one of the best inflation hedges for the average investor.
TIPS are government bonds that mirror the rise and fall of inflation. So, when inflation goes up, the paid interest rate does, too. And when deflation occurs, interest rates fall.
2. Cash
Cash is often overlooked as an inflation hedge…but remember cash is king in all economic trends.
With the pandemic proving just how unpredictable the economy can be, I suggest always keeping some cash in a high-yield savings
account, money market account or CD.
How much cash should you have
available? I suggest six to nine months for single-income households and six months of
cash for two-income households.
3. Short-term bonds
Keeping your money in short-term bonds is a similar strategy as maintaining cash in a CD or savings account. Your money is safe and accessible.
The key to our clients success is based on planning. We spend a lot of time understanding their goals and will advise the same for your lifestyle. Budgeting and planning are core tools we use to make sure our clients protect what matters most.
For more information contact Richard Chew: 312-952-8040, [email protected], www.1stcig.com.