How Rising Inflation Could Hurt Your Stock Portfolio in the Coming Months

Do you believe social security alone will give you the golden retirement you deserve?

Anyone who has awakened to the horrors of America’s balance sheet is perfectly aware that the state is not going to take care of you in retirement. Instead, you should be working towards either contributing to a private pension or making your money work hard in the markets.

In May 2021, the U.S. inflation rate hit 5%, the highest rate since 2008. Alarm bells are ringing, and Americans need to prepare for potential financial turbulence in the near future.

Here’s what you need to know about inflation and managing your own investment portfolio.

What Is Inflation?

Despite how often inflation is mentioned in the media, few people are aware of what it is. When inflation rates rise, the value of the U.S. dollar declines in the face of rising prices for goods and services.

In other words, the value of the dollar in your pocket declines. Inflation is always a factor, but when it begins to rise it plays havoc with businesses large and small across the nation.

How Does Inflation Impact the Stock Market?

When it comes to the stock market, inflation hits the stock market due to its impact on businesses. Periods of inflation typically see declining profits and revenues because consumers have less purchasing power.

Naturally, this causes many stocks to fall in value. Periods of high inflation are also associated with periods of high volatility. Those who invest wisely have plenty of opportunities to make money during inflationary periods.

The general rule of thumb is to opt for value stocks. Look for the stocks that are undervalued relative to their book value. These are the businesses that tend to do well within these market conditions.

Finding the Value Stocks to Boost Your Portfolio

When inflation rises, you’ll commonly see enhanced trading volume as nervous investors attempt to bail. Smart investors aren’t interested in temporary periods of high (or low) inflation because they understand long term value.

In the meantime, for novice investors to succeed they need to find value stocks. This requires comparing the market value with book value. As you would expect, this is a time-consuming process.

Instead, consider using a third-party platform like Atom Finance. They offer institutional-level investment data to provide you with the information you need to make an informed trading decision.

To find out more about finding value stocks, check out this Atom Finance review.

Invest in Physical Assets

Rampant inflation means that holders of cash become poorer overnight. The richest Americans remain relatively untouched by inflationary periods because much of their wealth is held in physical assets like property.

It’s never been easier to diversify into other asset classes with a relatively small amount of money. For example, consider AcreTrader. It allows ordinary Americans to remotely invest in agricultural farmland across the nation.

This is just one example of how easy it can be to diversify in the face of inflation, so take a look at this review on AcreTrader to find out more.

Rely on Safe Haven Assets

Overcoming inflation is as much about finding opportunity as it is about consolidation. Take a look at other investments, such as safe haven assets to protect the value of your money.

Gold and silver have always been the classic safe haven assets for investors looking to escape the inflationary hellscape. However, other safe haven assets are fast coming to life. Cryptocurrency is another form of save haven asset.

Various stablecoins are coming to the fore to provide alternatives to the yellow and white metals. It’s easy to invest in these safe havens through platforms like Coinbase. Take a look at this review on Coinbase to find out more.

Be Aware of Inflation but Don’t Panic

As inflation rises, fearmongers tend to creep out of the cracks to call for the collapse of the economy and the end of modern America. Investors tend to panic and make foolish moves in the stock market. During these complex trading environments, your best option is to stay calm and avoid panicking.

While it’s necessary to alter your strategy, it’s also important to make sure you don’t deviate too much. Inflation is temporary, but your portfolio is forever.

This is why we recommend not investing in anything you’re not committed to sticking with for at least five years. These principles for success will help you to iron out the ups and downs of the boom and bust cycle and nail that profit.

Are these dramatic rises in inflation likely spelling the end of the country as we know it?

Unlikely, but do you need to be mindful of inflation? Absolutely. Inflation is potentially hazardous, but with a calm head and a solid strategy in place, you can preserve the value of your portfolio and increase your net worth in the years ahead.