Kristin Hovencamp is an Investment Executive and Director of Business Development with HAZLETT WEALTH MANAGEMENT, LLC.

In 2020, the U.S stock market plummeted and recovered within 60 days. Though the severe market drop ended an 11-year bull market run, stocks finished the year at record highs. Investors who sold their stock portfolio during the early days of the crash may have missed out on the market rebound. Two years later, the inflationary landscape has investors wondering if they would be safer in cash. If you are a long-term investor focused on growing your nest egg, it is good to remember that inflation eats away at the dollar’s value. What actions can you take to stay invested while reducing portfolio risk?

You can never fully insulate your portfolio against rising inflation. However, you can invest in assets that perform better during inflationary periods.

  • Equities. Owning quality dividend-paying stocks can help protect income-focused investors. Consider investing in companies with pricing power and the ability to increase cash flows. For example, if the price of oil increases, a gas station can increase the cost of gas per gallon, affording some protection against a rise in inflation.
  • Fixed Income. Short-dated U.S. government securities may protect an investor’s purchasing power. Inflation-protected bonds are designed so bond payouts increase with inflation—for example, Treasuries and Treasury Inflated Protected Securities (TIPS).
  • Commodities. If we experience a weakening dollar, the value of gold, copper, and other metals should increase. Similarly, if growers raise the price of crops, such as soybeans, markets will charge more for soybean products.
  • Real Estate. Hard assets such as real estate tend to maintain their pricing power. If the residential real estate price goes up, then the cost of rent goes up, allowing it to maintain its value.

Sitting on the sidelines to avoid potential market losses could sound appealing. However, it may not be a strategic long-term investment strategy. Investments that have pricing power or protect purchasing power can help mitigate portfolio risk while providing returns during times of inflation.

Kristin Hovencamp is an Investment Executive and Director of Business Development with HAZLETT WEALTH MANAGEMENT, LLC, which is independent of Raymond James and is not a registered broker/dealer. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Dividends are not guaranteed and must be authorized by the company’s board of directors. Past performance may not be indicative of future results. 675 Sun Valley Road, Suite J1 + J2 Ketchum, Idaho 83340 208.726.0605.