Inflation is a very critical topic nowadays. We need a guide on how to beat inflation in 2022. Despite of all the interest rate hikes by the Federal Reserve, the inflation rate is not in control. The consumer price index in October 2022 is at 8.2%.So we have to do something to stop devaluating our money due to inflation. Please go through the blog to find the tips we shared to beat the inflation in 2022.
How to Beat Inflation 2022 Guide-9 tips from the Pros
The Central bank always trying to keep the inflation between 2-3 % but the inflation nowadays is at 8.2% expected to be more in the future. This high rate of inflation definitionally eat up your all profit and disturb your portfolio
Below given some tips to beat up the record breaking inflation
1. Increase Portfolio Diversification with Alternative Investments
The first tip on How to Beat Inflation 2022 Guide is to search for other alternative investment opportunities
Cash is one of the asset groups that is most susceptible to inflation. For instance, if you have $100,000 in cash and the inflation rate is 8.5%, your purchasing power will decrease by $91,500.
There for investment in cash is not an intelligent investment. Searching for an alternative investment asset will be a good idea. Such alternative asset can be real estate, petroleum, gold, fine wine or mutual funds .The above asset class are less susceptible to inflation.
For example-Gold and silver are good inflation hedge asset. They grow consistently during uncertain economic slowdown. Additionally they are precious metal and grow 5-6 % annually. whereas the S&P Global Luxury Index fell by 8%.
Most successful investor are hedging themselves against inflation by investing in real estate infrastructure and real-estate mutual fund
2.Bond investments such as Inflation Protected securities should be considered.
The second tip on How to Beat Inflation 2022 Guide is to opt and bond investment which is less suspected to inflation
Investment in bonds again give you chance to diversify your portfolio against this type of economic uncertainty. Even after low yield against other asset classes it will definitely protect you against inflation and give you an fixed income. As the central bank is raising the interest rate it is gradually becoming attractive investment option in this high inflation environment.
Bonds like TIPS (Treasury Inflation Protected Securities), for instance, are inflation-proof since their principal grows as inflation does.
3.Investment should be tax proof
The third tip on How to Beat Inflation 2022 Guide is to plan a tax proof investment
Saving tax is another great idea for saving money in this hard economic time. Try to make your investment tax proof .Tax will take a little portion of your profit and ultimately you will lose money. Optimize your taxable account and tax advantage account .Hold your investment in appropriate account to save taxes
4.Invest your excess cash into stocks
The fourth tip on How to Beat Inflation 2022 Guide is to Invest your excess cash into stocks
Keeping your cash in your bank account is no at all a good idea because the rate of return from the bank is less than the inflation rate ,ultimately you are going to lose your money. Instead put your cash into stock mutual fund or direct share of companies
Because the business having the pricing power will pass the cost to their consumer. This pricing power will help them to retain their profit that will ultimately pass to the share holder
5.Consider stocks of consumer staples with high pricing power.
The fifth tip on How to Beat Inflation 2022 Guide is Consider stocks of consumer staples with high pricing power.
The example of consumable staple are food and drink, house hold products, hygiene products ,alchol and tobacco. The business having pricing power can easily increase the price of their product without decreasing the demand. This type of pricing power easily help them to negate the inflation.
This is the reason why the share prices of consumer staple companies remain stable during this type of economic uncertainty.
6.Avoid putting money into businesses with high labour costs.
The sixth tip on How to Beat Inflation 2022 Guide is Avoid putting money into businesses with high labour costs.
Avoid selecting share of companies which are highly dependent on their work forces such as healthcare and retail business. Those companies have high labor cost, force the them to increase their employees salary due to inflation in-order to retain their employee and recruit more. And the increase in labor cost them force to increase the product cost. This is a cyclical process which will go out of control during inflation.
Most of the experienced investor keep distance from these stocks because they need a large amount of capital to tackle this type of economic disaster. Our objectives is to away from that companies which show significant increase in labor cost during inflation.
7.Avoid Stocks with a High Growth Potential and are risky
The seventh tip on How to Beat Inflation 2022 Guide is to Avoid Stocks with a High Growth Potential
Try to choose stead stock and are inflation proof. Keep away from rapidly expanding small business which are heavily depended on borrowings. The inflation will negatively impact these stocks because the us federal reserve will increase interest rate in order to control inflation. The increase rate will make the borrowing more expensive for these type of small business
8.Keep a record of your expenditures and make an effort to save
The eighth tip on How to Beat Inflation 2022 Guide is Keep a record of your expenditures and make an effort to save
The rise in the CPI is a sign of rising commodity costs. Your purchasing power is reduced as a result of these increased price patterns, which also increase inflationary pressure.
Simply begin keeping a list of all your expenses and attempt to:
Find less expensive replacements for some of the items in your shopping list.
Abandon buying unnecessary items you frequently buy.
Create a monthly budgeting plan and make an effort to stick to it.
9.Analyze historical inflation data
The ninth tip on How to Beat Inflation 2022 Guide is Analyze historical inflation data
You can find some current and potential inflation tendencies by researching prior high inflation trends. These patterns consist of:
- stellar performance of commodity stocks
- Continuity of the energy industry
- Housing market and other alternate asset classes have performed well.