To hedge against inflation, first, we must understand what it is and how it affects our financial well-being.
Inflation is the sustained increase in the price level of goods and services in an economy. This can happen for various reasons but typically occurs when the government prints more money to try and stimulate the economy (Say hello to the current global economy). As prices rise, people can purchase fewer goods and services with their money. This can have a detrimental effect on your ability to build wealth.
Over time, inflation decreases the value of money, making each dollar worth less in the future than it is today. For example, if someone has $100 in their wallet today, but five years from now, that same $100 may only be worth around $80 due to inflationary pressures. Therefore, beating inflation should be the top of your strategies to win as a wealth builder consistently. The Cova team shares five key ways to beat today's inflation realities.
Here are five key ways to hedge against inflation.
- Hunt for high-yield savings accounts: One way to hedge against inflation is to look for high-yield savings accounts that offer competitive interest rates. Various bank accounts and Robo-investor apps provide higher returns than regular savings accounts. So it's time to start hunting.
- Explore Alternative Investments: Alternatives such as stocks, bonds, and commodities can protect against inflationary pressures.
- Diversify Your Portfolio: By investing in various high-yielding assets, you'll be less susceptible to fluctuations in the market that could affect your overall rate of return.
- Invest in the Stock Market: Stocks are essential to any portfolio, as they provide exposure to a broad range of companies and industries. While the stock market may experience dips, historically, it's delivered returns that have beat inflation. Over the past 95 years, the average stock market returns clocked 12.3% yearly.
- Track your investments: Keep your eyes on everything you own and how they are performing: It's essential to regularly review your investment holdings and make necessary adjustments if warranted by changing economic conditions or overall market performance.
Why Use Cova to track your wealth?
- Peace of mind: Knowing everything you own can be discovered by your loved ones in the event of an eventuality brings peace of mind. Aggregate your assets, manage documents, add loved ones to your account and be able to share your asset information with them in anything happens to you.
- Know your net worth in real-time: Connect all your assets across multiple channels and asset classes and see your net worth update in real-time.
- Securely manage copies of important financial documents like wills, trusts, and other valuable documents.
- Collaborate: Collaborate with your spouses and financial advisors on your account. Share your asset information securely.