Paul Haarman explains currently, the US market is going through an all-time high inflation rate of over 7%. This high inflation means common people will face increased pricing of commodities. Foods, gasoline, and other goods will become more expensive. However, this is not necessarily something to be afraid of.
This inflation can provide opportunities for investors to get ahead of the inflation curve by purchasing more assets in an environment with higher prices. But it’s important to be smart about how you invest in this environment and make sure your investments are still profitable when they experience high inflation rates.
How Inflation Affects Financial Market?
If you do not understand, inflation can be defined as a situation where the supply of money rises faster than the demand for it in the market. This leads to an increase in prices and a decrease in the purchasing power of money. So, when people buy more goods with more expensive money, they could experience a greater burden on their money. As a result, financial experts like Paul Haarman consider inflation the best time to make healthy investment choices.
This is why certain financial markets can experience huge problems with loss of investor confidence during inflationary times, which could cause significant losses to common investors. This problem affects common investors most because they are unfamiliar with financial markets. But now, let’s look at how inflation impacts your trading strategies.
Expert Investment Tips By Paul Haarman To Tackle Inflation
Inflation is a real problem because it can significantly lower the purchasing power of money, which makes products more expensive. However, you cannot use this as an excuse to avoid investing during inflationary times. With advice from experts like Paul Haarman, you can make sure your investments are still making profits when introducing inflation in your investment strategies. Take a look at the following tips.
- To tackle inflation, Paul recommends an annual cash flow (approximately 8% of your total net worth), which should be invested in an interest-rate-sensitive asset such as bonds or stocks. These assets can help you avoid ending up struggling with inflation issues.
- If you have accumulated a considerable amount of cash, this can be used as a good short-term investment opportunity. For example, when a recession occurs, the stock market could experience huge falls, and it could be a good time to invest in these stocks.
- Invest in growing and inflation-resistant assets such as technology, real estate, commodities, and some stocks and bonds, which are deflated or traded at a cheaper price than their potential value. These are very sensitive to inflation and can offer you great benefits when prices rise.
- The common person should do his homework before investing in certain sectors or asset types because they might get affected severely by high inflation rates. For example, it’s better not to invest in gold or commodities if you have many of them in your possession.
Investing in funds or stocks with high inflation rates can provide great benefits to investors, but it’s important to keep your investments profitable during high inflation periods. So, make sure you have comprehensive research about your investment strategies.