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Inflation, how sweet is it? 3 Tips to Grow Your Money

Have you ever tried a Cardbury Milk Chocolate Bar? When I was school kid in London, this divinely luscious milk chocolate treat was the kingpin of all chocolate treats! I kid you not, there was not a single piece of candy born of milk and chocolate that could ever equal this delicious frog- shaped candy bar and you can argue with your elbows if you think otherwise. The greatest thing about this little delight was it costed $0.14. I was euphoric. However, I noticed that with every passing year, its price consecutively climbed by about ~$0.03. Now, I know what you’re thinking, two pence is hardly worthy of any quibble at all and one should just pay the dues and be on your merry way. But as a child (with desperately little pocket money) that two pence would reduce my purchasing power meaning I could buy less of anything else in the candy store before the school bell rang. Today (more than 20 years later), Freddo costs an eye-watering $0.33; a staggering 150% premium! How mortifying.

3. Invest: Build and/or stick to a disciplined investment strategy. If you do not have investments, use this opportunity to open a brokerage account or an Individual Retirement Account (IRA) to save for the long-term. An easy way to invest is to invest in exchange traded fund (ETF) and hold it for extended periods of time (i.e. years). Historically, this meant you would earn a positive return above inflation and it becomes more and more factual the further you go back in time. ETF’s are like buying a nice cold smoothie which contain lots of different fruits if you don’t want to buy a specific fruit (in other words, buy specific stocks).

If you do have these accounts established, remember to stick to a disciplined investment strategy, evaluate your exposures, and assess the implication of inflation on your assets. Are you well allocated to inflationary sensitive assets (i.e., assets that respond well in inflationary environments)? Inflation-Linked Bonds, Real Estate, Commodities, and equities tend to do well in inflation. Do not make any jarring decisions like putting all of your money in inflation-linked bonds. Remember, macro-economic conditions change. You should aim to create a portfolio that can withstand different macro-economic situations. However, it could be an opportune time to invest in these assets, if needed, to undermine the effects of inflation in your portfolio.

In summary, a little diligence, some vigilance, and planning will help reduce the effects of inflation on most aspects of your life.

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