How to protect your investments

YOUR INVESTMENTS AND THE EFFECTS OF INFLATION

investments

Most people who have just started investing are not always aware of the many things that will impact the value of their investments either positively or negatively.  It’s no surprise that when the global economy is as unstable as it currently is that there are more possibilities for your investments to be negatively impacted.  The main thing that you need to be concerned with is inflation and how to protect your investments from it.

WAYS TO PROTECT YOUR INVESTMENTS

There is really no right or wrong way to look at inflation.  However there are things that you can do to protect your investments from it.  The following are 4 different ways for how to protect your investments so that inflation does not negatively affect that nest egg too badly:

Protect your cash first – nothing hurts a family more from a financial standpoint than an interrupted cash flow.  You can protect yourself against this by investing in what are called TIPS or Treasury Inflation Protected Securities.  TIPS are an excellent way to offset the risk involved with your investments.  Offsetting investment risks is referred to as hedging and it is always recommended that you find something to invest in so as to protect yourself and your investments.

Put some money into gold or gold bullion – gold has always been considered a great investment, regardless of where the value is at when you purchase it – for the most part.  There are a number of economic and other aspects that investing in gold protects you against, besides hedging against inflation.  These include:

• wars
• social unrest
• declines in the investment market
• currency failures
• burgeoning national debt

Consider dabbling in the commodities market – resource-based investments (i.e. commodities) are another hedge against anything that can negatively impact your portfolio.  Typically, the commodity market is less susceptible to these downturns compared to other investment vehicles.

Shorting the dollar is another way to hedge and protect those investments – if you consider the fact that the US dollar could fail at any time based on the unstable state that the economy is in, there’s a lot to be said about planning ahead and hedging against this.  Considering this fact, it makes sense that there are flaws in the currency of the US and you should always underestimate where your investments stand against the value of the United States dollar.