The current inflationary trend is easily one of the most important financial considerations at the moment. Inflation has robbed millions of people of their savings and eroded the value of their investments and holdings.
Despite the best efforts of the government to bring inflation down, many believe that the current trend could quickly go on for much longer. Interest rate hikes will make it more challenging to borrow, and the rising prices of items will also put a damper on people’s ability to spend freely.
Nevertheless, there are tested and trusted ways for investors to navigate the current economic storm and come out with results.
Remember to diversify
One of the most basic rules of investment is to always diversify your portfolio. And when it comes to inflation, this continues to hold true.
You should keep in mind that inflation doesn’t necessarily affect assets the same way. And by diversifying across classes such as debt, equity, real estate, and even alternative assets, you can give your portfolio the boost it truly needs. When looking to achieve long-term returns with minimal risk, then diversification remains an important mantra to live by.
You can even check out investment assets like cryptocurrencies, which provide significant gains in short periods. As long as you get the right assets back, you could be smiling at the bank.
The crypto space has proven to be one of the most resilient in the past few months. While 2022 might have been a challenging one because of rising interest rates and inflation fears, coin prices have surged significantly this year and the market is looking rather vibrant once again. While this isn’t necessarily an endorsement of the industry, investors who are looking for value - especially quickly - can consider looking out for valuable cryptocurrencies to add to their portfolios.
Focus on transparency
Another important tip for investors will be to ensure that the brokers or platforms that they work with are transparent and reliable. This is especially true in the crypto market, where several companies have failed in the past year and have left their customers in limbo.
From FTX to Silvergate Bank and more, it has become obvious that there is a significant lack of transparency in brokers and institutions that investors trust to manage their money. All of these platforms take money from investors and essentially use it however they like, leaving them vulnerable when a bank run happens or investors panic.
This is why platforms like Ventax.io are more important than ever. This London-based management company provides a more trustworthy and transparent alternative to traditional institutions, allowing investors to easily get a handle on where their money is going.
Ventax group focuses on powering the new age of profitable investing. The platform is reliable and effective, offering a simplified way for anyone to make investments and profit. However, where it really shines is in its transparency tools. With Ventax, investors get a good look into all of their holdings, with regular trading operations broadcasts and performance reports.
Long-duration funds and fixed deposits might not be good for you
To manage the effects of inflation on your investments, it's important to avoid certain types of funds and investments.
Long-duration funds, for example, can be risky as they invest in long-term fixed-income securities that are more susceptible to interest rate hikes. Instead, consider investing in liquid or short-duration funds, which invest in securities with shorter maturities and are less vulnerable to interest rate risks. Similarly, fixed deposits may seem like a safe option, but their real returns may be negative once you account for inflation and taxes.
Prioritize profitable company stocks
When investing in stocks, evaluating a company's financials before committing to them is crucial. Companies with high debt or loss-making may not be able to weather the impact of inflation. Thematic stocks may also be risky as past trends may not necessarily be indicative of future performance. Instead, look for companies that can maintain pricing power and consider investing in large-cap companies for stability.
Balanced advantage funds can also be a good option as they invest in both equity and debt and dynamically shift between the two based on market conditions. This helps to protect your gains and minimize losses while removing the need to time the market.
Get the gold standard
Another way to protect your investments from inflation is to invest in gold, which is often considered a safe haven during volatile times. Sovereign gold bonds (SGBs) are a good option for investing in gold as they eliminate purity and storage issues and offer a fixed interest rate. They are also tradable on stock exchanges and are tax-exempt upon redemption. Gold ETFs are another option to consider, as they offer greater price transparency and liquidity.
Hold your nerve
Finally, it is important for you as an investor to also focus on stability and never fret when the market reacts. Keep in mind that the battle against inflation is one that is expected to last for months. And in that time, a lot of things will happen that will reflect market reactions. It is important for you to maintain your composure and keep your eyes focused on the overall objective of profitability.
Knee-jerk reactions can cost you a lot. And instead of reacting to every single thing, develop a strategy and stick with it for the long term.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.