An Inflation Irritation
Today, we are going to discuss inflation. Not that I particularly want to discuss the topic of inflation, but it has become the interest of the hour, and it deserves some airtime here on TOM.
Today, we are going to discuss inflation. Not that I particularly want to discuss the topic of inflation, but it has become the interest of the hour, and it deserves some airtime here on TOM.
What is the best hedge against inflation?
(a) Bonds
(b) Cash
(c) Stocks
(d) Gold
The answer is “c.” Why? Let’s keep it simple: if inflation is a rise in the price of goods and services and businesses sell goods and services, it would be safe to assume that sales would grow concerning inflation. This is an imperfect explanation because there are more variables and complexities, but the basic truth applies. And, history reflects this truth, stocks have a long track record of providing a return well beyond historical inflation in the aggregate and the rolling ten-year periods, etc.
So, if your goal is to bolster up your portfolio to combat inflation, then it would be worthwhile to study your asset allocation and understand how much you have allocated to stocks? Is your allocation sufficient based on your expectations and inflation concerns?
Links mentioned in this episode:
Trevor is a Partner, Director of our Private Wealth Advisor Group, and Author of Thoughts on Money.
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