Most of us have probably not missed the talk about increasing inflation. Central banks, both on this side of the pond and in the US, also seem to be a bit more careful now in their phrasing about not being worried and not intending to raise interest rates.
Personally, most of my investements are in directly owned RE with currently relatively little debt remaining. Increased interest rates will reduce value on paper, but probably not income for the mid to long term. However, appart from a small emergency fund, my cash reserves are invested in stocks (VOO, SPYD, VT & VTI – so mostly S&P500).
I’ve been wondering whether it would make sense to start moving some money into bond ETFs, maybe ~ 25% of my portifolio. Evidently, yields are currently misserable, so I am rather hesitant. I’d be curious to hear some other opinions!
The most terrible way to prepare for inflation is to invest in bonds. It’s the one asset (with cash) that does poorly in inflationary environment.
Non-cyclical Consumer goods (consumer staples) companies might be your best bet, since they can raise prices in accordance to inflation and people can’t stop buying what they sell. Rents also follow inflation so REITs might be an option as well.
Some inflation (around 2-3%) isn’t bad actually: it encourages people to consume because if they know that something they want will be more expensive tomorrow, they might as well buy it today. People spending money today is good for companies and ultimately for shareholders.
Have you seen that Michael Burry’s strategy?
He is buying PUTS for Long Term Bonds, meaning that he expects bonds to really go down!
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