Inflation was not seen as high for over 40 years. And instead, here it is, ready to erode our current accounts which have reached the record figure of 1,854 billion euros.
How do you fight it?
1- Staying Invested.
2- Investing in shares.
3-Keeping liquidity to the indispensable minimum.
But how do you manage a portfolio when there is inflation?
What investment choices should be made?
Investors are naturally concerned about inflation and its negative impact on the purchasing power of their invested wealth. You can mitigate its impact by overcoming it or by covering up against it.
A new academic study examined the relationship between US inflation and the performance of various asset classes over a long period of time (1927-2020). The study shows that the vast majority of asset classes generated positive average returns (except cash,).
The study results suggest that inflation hedging is not free.
The right mix of assets for growth and hedging purposes ultimately depend on the investor’s goals and needs. The good news is that most of the global assets studied were able to outperform US inflation over the long term.
Therefore, simply staying invested can in itself be an effective long-term solution to inflation problems.
Surely the worst choice, even in this case remains liquidity.
Unfortunately, Italians continue to set aside money in current accounts. Fear usually makes 90. In December it made 40, the new 40 billion that ended up on current accounts.
The total computation of 1.854 billion. A sum which is tempting, because to keep it there, with the inflation rising, the game is played by the central banks that recover some of the excess debt issued. In short, if before not having so much liquidity represented a choice, today, not having it represents a Necessity.