The current financial climate—marked by surging inflation, rising interest rates, market volatility, recession concerns, and geopolitical tensions—has left many investors uncertain. As a result, some are turning to cash to avoid further losses. However, given the high inflation rate, this may not be the most effective strategy.
With inflation at its highest level in 40 years, keeping money in savings accounts or CDs yielding low returns of 0.5% to 2% will likely result in a loss of value. While maintaining an emergency fund is important, keeping excess cash may harm long-term investment performance. Consider exploring other options like diversifying your portfolio, rethinking bonds, or investing in high-quality stocks and real assets.
Investing in securities and assets with low correlation to one another helps protect your portfolio from poor performance in any single investment. Diversification remains a cornerstone of long-term investment success.
The long bull market in bonds ended in 2022 with rising interest rates causing negative returns. Consider alternatives like Treasury Inflation-Protected Securities (TIPS), floating-rate bonds, or I bonds, which currently offer an inflation-sensitive yield of 9.62%.
Companies with low debt, high gross margins, and strong global brands tend to perform well in inflationary environments. Many high-quality stocks also pay dividends, which can help offset inflationary pressures on your portfolio.
Commodities and real estate have historically kept pace with inflation. Consider exchange-traded funds, such as the SPDR Gold Trust or Energy Select Sector SPDR fund, or Real Estate Investment Trusts (REITs), to easily participate in these markets.
Despite its volatility, the stock market has historically reached new heights over time. For those with a long-term horizon, patience has often been rewarded.
Regardless of the strategy you choose, consult with a financial advisor to align your investments with your goals and navigate current market challenges effectively.
Looking for a financial advisor? Alpine Bank’s Wealth Management division is here to help.
Products of our Wealth Management service are not FDIC insured, may lose value, and are not bank guaranteed.
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