One of the best things about working in the financial industry is having the pleasure of learning from my network. My specialty is in tax efficiencies in the life insurance segment, and I am always working with advisors, CPAs, and other financial pros. We get to share insights and I hear their unique perspectives that set them apart.
Naturally, many of us hear “inflation” and “recession” and the instinct is to worry. This profession has taught me two key things in terms of NOT worrying about the current economic state.
First, I learned that keeping a long-term perspective is the best way to turn anything that seems negative into something positive - or at least - neutral. Financial advisors and other professionals in the industry understand that success requires strategy AND patience. During times of inflation, interest rates rise and that makes certain investments more attractive. There are inflation-protected investments, buffer assets and high-yield savings accounts that all do well during these periods. Notice that people with diversified portfolios don’t worry as much about inflation. I’m not saying all of these people are wealthy and don’t have to consider rising costs and investment values. Rather, I’m saying people who invest for the long-term and ensure they have multiple sources of income options are less worried about the ups and downs of the market.
The second lesson is recognizing that times of inflation and recession are short-lived. Why worry about something that is most certainly going to end? Just as Financial Advisors know there is no such thing as an “average rate of return”, they know the market cycles and this period is just a predecessor to a bull market. Ensuring their clients have enough money to weather downturns is their specialty.
By diversifying their clients' portfolios across different asset classes, they ensure they have exposure to investments that can benefit from inflationary periods.
We know investments in real estate and certain commodities like gold and oil act as hedges against inflation.
Conclusion
If you’re worried about how this economy is affecting your savings, do what the pros do: think big picture.
Inflationary periods often present opportunities for investors who adopt a proactive approach. You can make any market situation work for you by staying informed and making sure your portfolio has hedges.
I’m happy to answer any questions you may have: jeff@efslife.com or call 773-318-9608.