Fears of inflation are anyone is talking about lately. In fact, worries of inflation are now higher in people’s mind than even the coronavirus. It’s a scary thing to happen and something we’ve been dreading since J Powell came out with his money gun releasing trillions into the market.
March has been a bloody mess, seeing mostly red the entire month. We lost most of our gains from 2021, and some stocks went down to their last all-time highs in November! That’s setting us back about 5 months in terms of profits.
Our favorite stocks like Tesla and Apple were among the stocks hit the hardest. It seemed tech stocks hated us and just kept getting lower and lower. Tesla dipped do much, it hasn’t been that low since December.
It seems like the market is slowly recovering for now, but it’s possible we will see inflation hit our economy and it’s best we prepare ourselves for when it does. I’m not saying it will definitely happen or it may not be as severe as some think, but there’s always a possibility.
Whether inflation happens or not, we need a better way to prepare ourselves from red days. It seemed like people saw their stocks dip earlier this month and let fears of something that wasn’t happening yet spiral out of control. We need to mentally prepare ourselves for bad days or month and focus on the long-term.
Don’t Check Portfolio Every Day
One way to solve this is to not check our portfolio every single day. The markets fluctuate constantly, so it’s common to see your portfolio go from -5% in the red to green at 3% up for the day. It’s a volatile market these days and it would be best to not even pay much attention to it.
If you’re an investor like me, you’re investing for the long-term. What the price is now shouldn’t concern us too much. It’s what the price will be 10 or 20 years down the road. Whatever is happening right now is temporary and will go up in the future.
There’s no use stressing out about it. But that doesn’t mean you should just turn a blind eye to the markets. Stay on top of current market news and understand what is happening In the present. Just because you don’t check it, you should have a vague idea about the state your portfolio is in. Is the S&P500 down today? Many of your stocks will probably be down as well.
Staying on top of the markets will help keep you informed and understand the reasons for why it’s down today or up at all-time highs. Knowledge is power and can help you make better more informed decisions when investing. We don’t want to gamble with our money.
Buy Low Sell High
There is a common saying among investors. Buy low and sell high. If you’re freaking out about the market and just want to take all your money out of your stocks and hide it under your mattress, then I’d highly recommend you stop that.
If the stock market is down, it could be a good opportunity to buy more of the stocks you want. If it’s been down awhile, like most stocks this month, and you sees signs of an upward trend starting, it may be nice to buy in at great prices.
Think of it like shopping in a discount aisle at the store. All your favorite stocks were set back months in profits. If you feared you got in too late, now’s your chance to get in at a good price.
Remember to not overextend yourself and spend more than what you can afford. Also please be aware of your portfolio weight. Do you have too much of 1 stock or 1 industry? Remember to diversify for a more stable portfolio.
Diversify
That brings us to the next section, which is to diversify your portfolio. I have 85% of my main brokerage in index funds. I covered all my bases with investing in the S&P 500, international stocks, low-cap stock and of course bonds. It’s important to remember where your money is going and how each category performs.
If you are investing in stocks, look at the industry of each stock. Are all the individual companies you invested in just tech? It may be wise to invest some money into other categories like biomed, food or other areas.
This past month, we saw stocks seesaw between tech stocks and recovery stocks. If tech stocks were down for the day, recovery stocks, like Disney, were up, and vice versa. Keep that in mind when building out your portfolio.
Hedge Against Inflation
Since many people are currently terrified about inflation, it could put your mind at ease to invest in some hedges against that possible situation. Find investments that normally outperform the market during periods of inflation.
Inflation-indexed bonds and Treasury Inflation-Protected Securities (TIPS) are good places to start. Also investing in natural resources can be another good alternative. Companies that mine for precious metals or focus on clean energy are good bets.
Finally, my favorite hedge against inflation would be cryptocurrency If the value of the dollar goes down, Bitcoin and other coins will come soaring through to new highs. They are decentralized and now connected to any periods of inflation.
Final Thoughts
Inflation is a scary event, but it could very well not be as bad as some are predicting. We really don’t know. So it’s no use freaking out about it and instead look at the situation with a clear head.
If it happens, what is the best way we can protect our money? How can you keep yourself sane as your portfolio sinks faster than the Titanic? Do your research and prepare your mind for these scary red days. Remember they are only temporary and will pass.
