How will inflation affect investments?
November 8, 2022

It’s certainly no secret that historic inflation rates are impacting everyone’s investments, and not in a good way.

However, financial advisors suggest now is the time to continue funding your long-term stock market savings, where equities, typically, will prevail over inflation, given enough time.

If history is any indication, experts say, the average annual return of the S&P 500 Index is routinely higher than the rate of inflation.

Of course, inflation is not the only problem facing Americans – we are also dealing with escalating interest rates, the ongoing pandemic, global supply chain disruptions and the war in Ukraine, all of which are challenging equities. But, financial planners’ advice remains consistent. Keep adding to your retirement savings, if at all possible, and keep the long view in mind.

Still, times being what they are, there are greater risks with equities, making it more important than ever to be mindful of your portfolio’s diversification. It may be wise to rebalance your portfolio and ensure your money is invested in stocks, bonds and other areas. For instance, gold and commodities have held their value during inflationary periods in the past.

For older investors closer to retirement or already retired, evaluating your portfolio may require a different type of analysis. Age definitely does matter when it comes to investing. We can certainly help you with your retirement planning.

Some financial advisors are recommending more Roth IRA conversions, while others suggest considering dividend-yielding stocks, including public utilities, which often have more stable earnings. Investors who have done well in the real estate market and have sold properties at robust prices will need experienced tax advice on how to offset their capital gains.

As always, we are here to assist you during these volatile times, as well as during calmer times. Our expert tax and accounting advisors can guide and help you plan so that you can weather the ups and downs of the economy and the markets. Please reach out today.


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Diamond & Associates CPAs