So I was analyzing some industry data today regarding inflation. Manufacturers in the industry that I am in our rising prices across the board. Supply chain costs have gone increasingly in an upward direction this last year and it has gotten to the point where companies are clearly announcing a raise in pricing on their entire lines of products. I started thinking about what you should do to protect yourself in times of inflation. Effectively the danger is that rising prices reduce the profitability that your assets are to gain in exchange. Effectively the less those assets can purchase reduces your profitability. This is a real issue for people living on retirement income from assets. The more prices inflate the less the money they get from their assets can purchase for them. That means that they need to take more money out and reduce the longevity of their retirement income. The strategy in times like these is to transfer money into assets that hold value for longer periods of time to withstand the pressures of temporary pricing inflation. Obvious things are like real estate and tangible things like precious metals. However, it can also include more value sustaining industries such as financial companies and consumer staples or products companies.
Anyway the reason this really hit me today was not that I need to change my stock portfolio, but rather what I invest my life in. The older you get the more inflation you experience. Things are harder to do, things do not come easily any more. You are experiencing life inflation. As a consequence you need to invest in things that hold value longer. Family, Friends, Relationships. These hold value for a long time. Be wary of wasting your time on short term gains that are subject to the crippling costs of life inflation.
Guy Reams
