We are currently living in a transitory inflationary period, but it is not like the 1970s. Investopedia defines inflation as, “the rate at which the value of a currency is falling and, consequently, the general level of prices for goods and services is rising.” If inflation is 5% this year and the cash in your savings account at your local bank is earning 0.10%, then your account is losing 4.90% this year. Here are a few types of investments which may help keep up with, or surpass inflation:
A Real Estate Investment Trust (REIT) is a company which invests, either directly or indirectly, in real estate. REITs can own residential, commercial, apartments, hospitals, hotels and other various types of income producing real estate assets.
Commodities are another investment offering growth potential in times of increased inflation. Commodities are a raw material or agriculture product that can be bought and sold. Gold, water, coffee, lumber and natural gas are all prime examples of commodities.
And finally, companies that can pass their rising costs onto their customers and this also applies to the industries that provide essential services. Some common examples are health care, materials, food and health care industries. This is why getting ahead of inflation is an important reason to invest in assets that offer potential growth.
Branden has been a key member of the Independent Financial Services (IFS) team since 2013. He is a Financial Advisor, Portfolio Technician, Certified Financial Planner, and Accredited Asset Management Specialist. Branden’s professional registrations include the Series 7, Series 66 as well as Florida Life, Health and Variable Annuity insurance licenses. As a Financial Advisor, Branden develops financial plans for clients which includes creating and modeling different possible financial scenarios, preparing client reports along with providing key recommendations for helping clients achieve their financial goals.
Be advised that investments in real estate and in REITs have various risks, including possible lack of liquidity and devaluation based on adverse economic and regulatory changes. Additionally, investments in REIT’s will fluctuate with the value of the underlying properties, and the price at redemption may be more or less than the original price paid.
Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.