Friday, March 29

What asset classes to invest in with high inflation in the United States?


The inflation rate in the US reached the 7.0% in December. Although the analyzes focus on how this affects the politics and consumer power of citizens, we must also emphasize when we speak of investment. Therefore, there are some asset classes in which to invest during a high inflation according Ben Geier and Yahoo Finance.

According to a recent article by the wealth management services company Northern Trust, the asset class best positioned to protect your portfolio during a period of high inflation like the current one are real assets based on shares.

What are share-based assets?

Real stock-based assets are those that include natural resources, globally listed infrastructure and global real estate. A real asset is an investment in which the value comes from the intrinsic value of the asset instead of an invented value. The Actions of a company, for example, they have no real value: At the end of the day, they are just a piece of paper. The value comes from the company determined by the market. The land and oil, on the other hand, have an intrinsic value as usable resource.

However, real assets based on shares have some market mechanism. For example, investing in a Real Estate Investment Trust or REIT, which is a type of business that owns and operates income-producing real estate assets. You are investing in the land through the REIT, which is easier and mitigates some risks.

A common investment to offset inflation is Treasury inflation-protected securities (TIPS). However, Northern Trust found that the relatively lower return on these investments may not actually cover the loss caused by high inflation. However, many types of real equity-based assets do well during high inflation. The natural resources, for example, obtain a yield of 20.9% during high inflation, while the listed global infrastructure get a yield of 14,5 %.

It is important to note that these classes may not perform well during normal inflation. Natural resources only see a 2.4% return during normal inflation. For this reason, it is important to monitor inflation if you plan to use these assets as part of your inflation strategy.



www.estrategiasdeinversion.com