National Poll – Would Trump Be Handling The Gas Shortage, Israel, and Inflation Crises Better?
#1. What Kind Of Stocks Should You Invest In With Inflation Rising?
Select all that apply:
Correct Answers – B and D.
Answer Reason – Investing in growth stocks like Apple, Google, Facebook, etc. during “normal” times is riskier due to high valuations. But is still mostly a sure bet because of how dominant these companies are.
But during inflation, investing in these kinds of fast growth stocks is ultra-risky because inflation eats away at future growth… Which is what growth stocks are valued on.
This means A isn’t the answer.
And unless you are fully in retirement mode and have enough money to live off you should always be invested in some stocks. So, C isn’t the answer either.
The answer is B and D because value stocks become more valuable during inflation. This happens because current assets, profits, and cash flows have more value than farther away assets do.
And this is the way value stocks are valued typically. On what it’s doing now.
You should also own dividends because they can help you fight the negative effects by paying you say a 2.7% dividend as an example.
If inflation is 1% and you own a dividend portfolio that pays you 2.7% on average – you’re still outpacing the rate of inflation and earning a return.
Owning both dividend paying value stocks is a great way to protect your retirement from inflation.
#2. Which Kinds of Industries Will Best Protect Your Retirement During Inflation?
Correct Answer – A.
Answer Reason – The answer is A because consumer staples – companies that create and sell things we use every day – can raise their prices to fight the effects of inflation.
But it gets even better because it can – and already has – raised its prices to fight its own rising costs of inflation.
Prices on most of Kimberly-Clark’s North American products will rise by the mid-to-high single digits, and consumers can expect to see most of the higher price stickers by late June. Impacted business segments include baby and child care, adult care and Scott toilet paper.
The above is via CNBC.
Few companies can raise prices without losing customers.
This competitive advantage is called pricing power and its enormous.
Not only because it keeps Kimberly-Clark revenues, profits, and cash flows higher… But also because this helps fight inflation too.
If it raises prices by 10% because its own costs rise 8% it automatically increases its margins by 2%… Without any additional costs.
#3. Should You Panic Over Inflation And Your Retirement Account?
I never recommend any investor panic over any kind of investment, so this is a big no.
What you should do is prepare your portfolio by doing the following things…
Continue to make sure your retirement portfolio is invested in great stocks that have the following traits…
- They’re cheap.
- They have little to no debt compared to a lot of cash.
- They produce large profits and cash flows.
- They pay dividends.
- And make sure they aren’t in industries that could be hammered by Covid in case it comes back.
These kinds of stocks – the ones I try to find for you every day – are things you should continue investing in because they will provide you good to great returns no matter what the market is doing.
All while protecting you from the major risks like valuation, unemployment, debt, and inflation.