Small Business Owners' Guide to Dealing With Stocks and Inflation

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As a Small Business Owners employee, it is imperative to adapt your investment strategies according to the current economic scenario. For instance, stocks are not an ideal short-term hedge against rapidly increasing inflation, but bonds put you at an even greater disadvantage. Bonds are promises to pay in dollars, and those dollars are fixed unless you hold Treasury inflation-protected securities or other IOUs that adjust their payments with changes in price levels. In an inflationary environment, investing in short-term bonds is better than investing in long maturities; as inflation rises. As a Small Business Owners employee, you can use this information to take advantage of rising interest rates.

'The closer you get to retirement, it might be wiser to increase the allocation to income producing investments over more volatile investments.'

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Gold and commodities also do well in periods of high and increasing inflation. But, like bonds, they have poor results over the long term. Gold, for example, has returned only 0.7 percentage point per year more than inflation over the past two centuries.

As a Small Business Owners employee, you may want to consider mitigating inflation on your portfolio by diversifying internationally. If inflation kicks into overdrive, the dollar will fall and foreign stocks will act as an automatic hedge as money invested in foreign currencies is translated into more dollars back home. For Small Business Owners employees, it is important to avoid speculative assets that will deflate in price when inflation slows. For those in Small Business Owners companies aiming to invest long-term, stocks may be an excellent hedge against rising prices.

If you are interested in more information about this topic, view our e-book here: https://retirekit.theretirementgroup.com/effects-of-inflation-e-brochure