Should I save or invest during inflation?
Invest in assets that have the potential to generate returns higher than the rate of inflation.
Greetings!
When it comes to managing your money during times of inflation, the question of whether to save or invest can be a difficult one. Inflation is an economic phenomenon that occurs when the overall price level of goods and services in an economy increases over time. This can lead to a decrease in the purchasing power of your money, as the goods and services you buy will become more expensive.
For many people, the instinctive response to inflation is to save their money in a low-risk savings account, which will protect them from inflation and the potential losses associated with investing. This can be a good strategy for risk-averse people or who have a short-term savings goal in mind, such as saving for a down payment on a home.
However, for those who are willing to take on a little more risk and have a longer-term savings goal in mind, investing during inflation can be a smart move. By investing in assets that have the potential to generate returns higher than the rate of inflation, you can grow your money over time and protect its purchasing power.
One option for those looking to hedge against inflation is to invest in stocks or stock-based mutual funds. You can start micro-investing with as little as $10/month on Bamboo, Rise, Chaka and some others.
These types of investments have the potential to generate returns that outpace inflation, particularly if the company is in a growth industry or has a history of strong performance.
Another option is to invest in real estate, which has the potential to generate income through rental payments and can also appreciate in value over time. This can provide a hedge against inflation, as the value of real estate tends to increase along with the overall price level of goods and services.
Finally, investors can also consider investing in inflation-protected securities, such as Treasury Inflation-Protected Securities (TIPS) or inflation-linked bonds. These types of investments are designed to provide a return that is linked to the rate of inflation, protecting your money from losing purchasing power.
Quick Stats.
The annual inflation rate in Kenya was at 9.5% in November of 2022, holding close to a near 5-1/2-year high of 9.6% in the previous month but below market estimates of 10.1%.
Ultimately, the decision of whether to save or invest during inflation will depend on your individual goals, risk tolerance, and financial situation. It's important to carefully consider your options and consult with a financial advisor if you need guidance. By taking a proactive approach to managing your money during times of inflation, you can protect your wealth and ensure that your money maintains its purchasing power over time.
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Here are some quick snippets on taking advantage of inflation:
Invest in assets that have the potential to generate returns higher than the rate of inflation. By investing in assets that can generate returns that outpace inflation, you can protect your money from losing purchasing power. Options may include stocks or stock-based mutual funds, real estate, or inflation-protected securities such as Treasury Inflation-Protected Securities (TIPS) or inflation-linked bonds.
Consider hedging against inflation with commodities. Commodities, such as gold and silver, can provide a hedge against inflation as their prices tend to rise along with the overall price level of goods and services. However, it's important to note that investing in commodities can be risky, so it's important to carefully research and consult with a financial advisor before making any decisions.
Increase your income. Another way to take advantage of inflation is to increase your income. This may mean exploring new revenue streams or negotiating higher prices for your products or services. By increasing your income, you can keep pace with the rising costs of goods and services and maintain your purchasing power.
Review your budget and cut expenses where possible. During times of inflation, it's important to closely manage your cash flow and make sure you're not overspending. Review your budget and look for areas where you can cut expenses, such as reducing your entertainment budget or cancelling subscription services you don't use. This can help you free up cash and better manage your money during times of inflation.
Disclaimer: This is not financial advice. Contact your bank or any financial expert before committing to any investment. Do your own research.
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