One strategy to invest in the midst of inflation is not to keep money in cash. Why is that?
So, according to one Tesla CEO Elon Musk, investors should save money in kind. This is done when you want to invest even in the middle of a period of inflation.
"In general, it's better to have physical goods, such as a house or stock in a company that you think makes a good product, than to stray cash," he said as reported by CNBC, Tuesday (15/03/2022).
In this regard, Elon Musk's strategy is in line with what was suggested by Berkshire Hathway Founder Warren Buffet.
In 2009, at the end of the Great Recession, Buffett told Berkshire Hathaway's annual shareholder meeting that one of the best ways to protect himself from inflation was to own a part of a "great business."
That's because, no matter what happens to the dollar value, the business product will still be selling well.
He used one of his own investments as an example.
"If you own a Coca-Cola company, you're going to get a certain portion of the workforce 20 years from now and 50 years from now for your product and it doesn't make any difference what happens to the price level," he said. Because, people will still pay for the products they like.
Given that inflation has continued to rise throughout the season, consumer prices in the US have also risen to 7.9 percent year-on-year. This is the highest jump in the last 40 years.
So, the higher the inflation rate, the faster money loses its value.
On the other hand, investment generally grows over time. That's why during periods of high inflation, Musk and Buffett both recommend investing in companies whose stocks are very strong and tend to stay consistent.
"If you sit with too much money, you're hurting yourself," said Delano Saporu, a financial advisor and CEO of the New York-based New Street Advisors Group.
However, it is important to remember that taking stock can be risky. Even if a company has performed well in the past, it does not guarantee its stock will rise in the future.
In contrast, many experts, including Buffett, recommend investing in low-cost index funds because they are less volatile. However, it still has to take advantage of market growth.
There's also the S&P 500. In fact, companies like Amazon, Apple and Microsoft, have managed to outpace inflation for years.
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