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Protect Against Inflation

Posted by webmaster on 31 July 2023

Inflation as we are currently experiencing is the gradual loss of purchasing power, reflected in broad increase in the prices of goods and services. The world appears to be moving towards a stage of acceleration in inflation. This has been a growing topic for most investors in recent months.

This elevated inflation levels are occurring due to a variety of factors including higher energy prices, stringent economic policies and ongoing supply chain issues.

Consumers have been experiencing the impact of rising prices in their daily lives with significant increases in the cost of everyday essentials such as food and fuel. This also poses the question as to how investors can position their portfolios to mitigate the impact an inflationary environment and also how individuals can better structure their finances to lessen the impact of inflation.

Fixed Income Securities

Fixed income securities can differ quite substantially when it comes to interest rate sensitivity. For one, shorter duration bonds limit risk as their prices are less vulnerable to interest rate changes. In addition, portfolios with exposure to Treasury Inflation Protected Securities (TIPS) and Real Return Bonds can help to alleviate some of the risk as the principal of these securities increases in-line with the rate of inflation. Also, other fixed income asset classes have historically performed well during these periods.

Elevated inflation pressures tend to increase the risk of rising rates. In environments where interest rates are on the rise, prices of traditional, longer-dated bonds can be negatively impacted which can result in more volatile bond returns and as a result diminish some of these intended portfolio benefits.

Positioning Real Estate Fixed Income Bond Against Inflation

A real estate fixed income bond is an investment type that is a very suitable response to inflation. It enables you to invest safely in a real estate backed asset with fixed returns of up to 17.5% per annum and early maturity that gives access to the principal from 12 months. It can be further described as an investment that allows you to maintain a level of liquidity while making your money earn. Coupons are paid monthly, quarterly or biannually in forex. So, instead of saving up cash in the bank and having them diminish in value over time, it is prudent to direct some percentage into this investment type recommended by marie consulting & partners.

Investors already invested in inflation protected assets may want to consider diversifying their portfolio for excellent returns. Real Estate fixed income bonds are generally added to a portfolio to lower overall volatility and mitigate downside risk.

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