Inflation heated up in 2021, and we’re still seeing elevated prices. As an investor, how should you respond?
Generally speaking, stocks can do well in inflationary periods because companies’ revenues and earnings may increase along with inflation. Some market sectors will do better than others, but it’s still a good idea to own a mix of stocks representing various industries.
You also might want to consider stocks that regularly increase dividend payouts, which can help you stay ahead of inflation. Keep in mind, though, that companies can reduce or cut dividends at any time.
How about other investments, such as bonds? Rising inflation can erode the purchasing power of future interest payments you receive from bonds, causing their price to drop, which may be a concern if you plan to sell your bonds before they mature. However, Treasury Inflation-Protected Securities, or TIPS, are indexed for inflation and can help provide protection against it.
Ultimately, inflation may indeed be something to consider when managing your investments. But other factors – especially your risk tolerance, time horizon and long-term goals – should still be the driving force behind your investment decisions.
This content was provided by Edward Jones for use by Daniel Pellerin, your Edward Jones financial advisor at 189 East Main Street Suite G, in Newport, (802) 334-6261.