Greetings! Welcome to the dog days of summer! This year has flown by and as we look forward to a break in the warm weather, there is something else that seems to have everyone sweating: talk of inflation. From gasoline to lumber prices, it’s hard to miss the fact that prices are rising in all sectors of the economy. This month’s newsletter will provide you with some resources and information to help you better understand inflation, how it relates to your finances, and how to react to it.
- Watch: Here we have two links: the first is from The School of Life and focuses on the basics of inflation. Start here for a quick primer on what inflation is and how it works. Once you’ve got a good grounding in the concept of inflation, you may be wondering how best to invest during an inflationary period. Our second video draws on quotes on inflation from Warren Buffet through the years. One of our favorite takeaways from the video is that one of the best ways to counterbalance the negative effects of inflation is to maximize your own talents and improve the skills you have to increase your earning potential. You may not be able to control inflation, but you can surely control how you react to it.
- Read: At Bona Fide Finance we take a long view of the market and believe in not letting short-term conditions dictate our long-term actions. That being said, it is nearly impossible to experience high levels of inflation without some (or a good bit) of worry about our portfolios. This Investopedia article discusses the effects of inflation on stocks. One of the key takeaways from the article is that value stocks perform better than growth stocks in times of inflation. If you have been working with us for any length of time, you are most likely to benefit from that. Hedges are another topic that often comes up when talking about inflation. This article from US News details 3 inflation hedges that might be worth considering. Finally, this post from Advisor Perspectives shows that the inflation numbers are primarily being driven by increases in auto, gas, and shelter prices.
- Listen: If you’ve been watching the news or talking to just about anyone these days, it’s likely that you’ve heard the term ‘transitory inflation’. What exactly is it, and is the inflation we are experiencing now actually ‘transitory’? This podcast from Marketplace highlights what regular consumers think about inflation and what areas are being hit the hardest at the moment. Whether short-lived or longer-term, any kind of inflation is unwelcome and we hope this period of rising prices is as short-lived as possible.
Thank you for taking the time to read this month’s newsletter – we hope to have provided you with some valuable insights and information sources. This is not intended as investment advice. If you are thinking about taking action based on any of the information in this newsletter, reach out to us first so we can discuss and make sure your full financial plan is being considered. If you intend to share this content with friends and family, advise them to speak with their financial advisor prior to taking any action as well.
For our ongoing clients – keep an eye on your inbox for an additional article courtesy of DFA!
Make it an amazing month!
The Bona Fide Family