The year 2020 was very tough for investors. Since financial markets are not performing well due to the pandemic, everyone is looking for ways to protect their investment. Additionally, the government is printing more money to pay back the loans.
As a result, inflation is rising, and investors are in fear that they can lose their money. Learn how to save your investment during inflation.
How To Save Your Investment From Inflation
Inflation can reduce your potential gains as the value of your investments decreases. So, how can you protect your investment during inflation? Below I have mentioned the top five ways to build an inflation-proof portfolio.
- Invest in Mutual Funds
Do you have enough time and financial knowledge to analyze stocks? Generally, most of us don’t have enough time and even the ability to identify profitable investment opportunities from the market. So, they opt to consult a financial advisor for building an investment portfolio.
However, some people don’t want to deal with a financial advisor personally because they need to pay them even if they make a loss. Additionally, it’s not easy to find a trusted and proficient advisor who can give you the right financial advice. Therefore, many people choose mutual funds instead of any other assets.
Diversification is the most reliable way to fight against inflation and reduce risk. Since a well-diversified portfolio includes various stocks, it reduces the risk. When you diversify your portfolio, they may reduce your returns, but they can yield long-term steady returns.
- Dividend-Paying Stocks Are Great
Companies that pay dividends are great options to stay ahead of inflation. The interest you gain from banks due to fixed deposit or with a savings account cannot help you to deal with inflation. But you can get good returns from dividend-paying companies.
When you are choosing a stock, evaluate the dividend yield before investing. Divide the stock price with the dividend you receive annually to calculate the dividend yield. Then compare it with the inflation rate and check if the dividend yield is higher. It’s an efficient way to save your investment from inflation.
- Add Crypto to Your Portfolio
Last year, Cryptocurrencies provided steady and significant returns during the pandemic. There are several predictions that show the growth in Cryptocurrencies will also continue this year. Moreover, Cryptocurrency is considered to be a great tool to fight against inflation, especially Bitcoin, Bitcoin Cash, Litecoin, and Ethereum.
Whether you have never invested in cryptos or investing in them for a few years, BitcoinPrime can provide you a great trading platform. However, ensure that you talk to a crypto expert and gain some knowledge about crypto investments before you actually put your money in them. As a beginner, it’s better to start with Bitcoin and Bitcoin Cash.
- Gold and Real-Estate Can Help
Gold and real-estate have been the best choices among successful investors during inflation for many years. If you ask an investor who has made a sustained profit from their portfolio, they will say they hold some gold.
Since gold is the most reliable asset due to its ability to store value during inflation, financial advisors recommend investing in it. Moreover, gold is easier to buy and sell with ETFs and bonds. You can buy and sell gold without worrying about its originality because you don’t have to physically check its quality.
Apart from gold, you can also invest in real estate during inflation. However, some people don’t consider real estate because they think it’s hard to buy, sell and real estate properties. If you are also thinking that way, you can choose to invest in REITs. You don’t need to consult an agent for investing in real estate because you can invest in them from your trading accounts.
These are some of the best ways to fight against inflation. However, there are several other ways, but you can start with these options easily. Ensure that you evaluate every potential investment asset carefully before investing.