Inflation in 2021 was nearly 7%, the highest since 1982.
If you’re not investing your money to earn significant interest, your purchasing power will decrease as inflation continues to climb. You may already know that keeping all of your money in a savings account isn’t ideal. While it certainly is important to keep some cash accessible, the money you don’t plan on using in the next year or so should earn more interest for you.
Perhaps you inherited money from a parent or grandparent, and you’re not sure how to manage the extra cash. Or maybe your business did really well in the last few years, and you now have more savings than before.
So, how can you protect your savings against inflation? The solution is to make investments that can keep up with inflation. Here are a few options:
Impact investing is similar to investing in the stock market. However, instead of only looking at numbers, you’ll choose causes that will make a real difference in the world. For example, you might invest in renewable energy, affordable housing, community development, healthcare, or other causes. Not only does impact investing help your money earn interest, but you’ll make the world a better place.
When done well, both stocks and bonds are great ways to earn interest on your money. A combined stock-bond portfolio helps mitigate the risks often associated with investing in a stock. Bonds are typically less volatile and involve lower risk because they earn a fixed income. In other words, no matter what, bonds earn a certain amount of interest you can count on. Stocks, on the other hand, are an equity investment. Although this type of investment is high risk, it can also bring high profits. There is no guarantee that you’ll earn money from a stock, as it depends on the company’s performance. For this reason, a combined portfolio is often recommended to balance out your risks.
Another great option is ETFs or exchange-traded funds. These funds include a variety of assets such as stocks, bonds, and commodities.
Owning a property can be a great way to earn passive income. In many areas, properties also increase in value over time, which effectively means your investment grows. You can take an active or passive role in real estate, and choose to invest in either residential or commercial buildings. For many people, owning real estate can be an excellent way to fund their retirement or diversify their income.
Business owners may consider reinvesting some of their savings into their company. For example, you could give a loan to your business or make a cash equity investment. This can be a double win for you. Your business can do better, and you can also earn from your investments. As with any investment, don’t go “all in” on one option. Instead, diversify your investments to balance your risk.
You might also consider investing in yourself, just like Peter Buffet did. Pay for your degree, training, education, or invest in starting your business. A smart investment in yourself will result in greater earnings in the long term.
Bitcoin, cryptocurrencies, and NFTs (non-fungible tokens) are alternative investments that can result in impressive earnings. Although not as well-known as the stock market, making alternative investments with a portion of your funds can help you make sure you’re in on the next big thing.
With these five investment strategies, you can transform your savings into hardworking money that increases in value over time.
Do you need help with investing? Contact Elaine King to discuss your investment plan today!