Navigating High Inflation Waters: Time-Tested Strategies for Investors

By: Scott Van Den Berg, CFP®, ChFC®, CEPA®, AIR®, CRPS®, CMFC®, AWMA®

As the overhang of inflation and higher interest rates continue, the once relatively calm waters of the financial markets have become increasingly turbulent. For investors looking to not only safeguard their assets but also to navigate these challenging times, understanding the nuance of high inflation becomes paramount.

Inflation, in its essence, isn’t merely about numbers on a price tag. It signifies the slow erosion of your hard-earned money's purchasing power. Imagine holding a dollar bill today, and with each passing moment, its ability to buy the goods and services you desire is quietly, yet persistently, waning.  Inflation is the worst kind of tax, and its impact can be devastating to both individuals and countries alike. 

For generations, diversification has been the siren call for investors worldwide, and its significance in the current economic climate cannot be overstated. This isn’t just about spreading your assets across different sectors and geographies, rather, it's more about creating a protective barrier against the unpredictable. Think of it like insurance for your investments. Moreover, depending on your time horizon, dividend-paying stocks bought at the right price, often seen as the staid choice for conservative investors, can act as anchors during these choppy waters, providing both relative stability and income.

But there’s another arsenal in the investor's toolkit that often shines in inflationary times: real assets. The allure of gold, for instance, has withstood the test of time, acting as a financial bastion whenever economies waver. Real estate, though property specific, has the potential to be a good inflation hedge due to its tangible nature and the potential to become income producing. Commodities too, from oil and gas to essential grains, oftentimes pivot inflationary price hikes to their advantage, thus having the potential to offer investors a frontline defense.

Yet, the game of money isn’t just about how much you have, but about what it can purchase. As inflation mounts, cash, despite its appeal, can become a liability. It’s akin to an ice cube under the Texas sun - deceptively solid but prone to melting away. On the other hand, short-term bonds, especially those with quick turnarounds, can act as a buffer, offering returns that adapt as interest rates respond to inflation's whims.

The mantra for these times? Have a strategy, be flexible and opportunistic, and stay informed. The ever-evolving landscape of finance necessitates continuous learning. Knowledge, after all, isn't just power – it's potential protection. And in these uncertain times, regular portfolio and financial plan reviews can act as a lighthouse, helping to ensure your personal financial goals are aligned with your investments and their allocation. From my 32 years of experience, I can tell you that this type of review and alignment is a key factor in bringing about peace of mind, as well as financial security.

To navigate inflation is to understand it, to respect its influence, and to adapt. At Century Management, our mission has been to guide investors, even when faced with the most unexpected of challenges. With the highest inflation in decades, and the prospects of this inflation remaining “sticky” and therefore elevated for some time, being informed, and having a thoughtful financial plan and investment allocation can help you weather the storms ahead. 

For a deeper dive into strategies tailored for the current financial climate, visit centman.com.

Century Management ("CM") is an investment adviser registered with the US Securities and Exchange Commission. Registration does not imply a certain level of skill or training. CM is also registered as a Portfolio Manager in the Province of Ontario. More information about CM’s investment advisory services can be found in its Form ADV Part 2A and/or Form CRS, which is available upon request. Past performance is not indicative of future results. This discussion is not intended to be investment advice and does not consider specific client investment objectives. CM is not making a recommendation for or endorsing any investment strategy or particular security. All investments involve risk and unless otherwise stated, are not guaranteed. Principal loss is possible. Forward-looking statements are not guaranteed. CM-2023-11-01