Revealing Our Investment Strategy while Inflation Hits a 30-year High

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Setting up Your Own Inflation Resistant Investment Portfolio

To give this context, since 1926, inflation averaged below 4%. However, 2020 flooded the market with fiscal stimulus dollars, leading to a pseudo-hyperinflationary period of 2022 and beyond. In a classic case of too many dollars chasing too many tweets, a retail stock is trading at an all-time high.

As of early 2022, without a clear return to full production and a constant will they or won’t day Russia-Ukraine or China-Taiwan, the world is on edge.

The tech industry, which dominated since 2000, is suffering from too much demand and a lack of semiconductor supply.

A well-diversified portfolio is still critical. The reversion to the means is in full effect. Your investment goals should align with your risk tolerance and risk capacity. In other words, you need to develop a flexible and resistant portfolio based on systemic strategies, economic and business cycles, as well as your own needs.

Graphic #2 – TNFG’s 2021 Invst. Strategy

For example, I included my own 2021 strategy (see graphic #2)

This investment strategy addresses short-run growth while minimizing taxes, and even compound using a DRIP.

Setting a vision for our investments and staging your household budget,
Determining your asset allocation,
Creating and Styling your portfolio strategy and desired outcome,
Reassessing and rebalancing your portfolio weightings, and
Profit recapture over long-term holding where needed.

An Investment Portfolio Calibrated for Inflation and Upcoming Recession

All records indicate that China, the main international player is in a recession. With Europe still struggling against the pandemic, they are likely headed into a recession by mid-2023. This leaves the US in a precarious position of trailing behind.

Sorry to say this, but a recession is pending in 2024. The only good news is that it’s unlikely to last longer than a year as international stocks will be booming through their early expansion. Suffice to say, it’s a cycle. See the graphic below.

Profits, Savings, and Inflation Investment Strategies

You merely have to figure out a way to shift to where profits will be solid and prepare for the next bear market for millennials. For one, you need to run toward equities and away from high cash positions. Anyone caught dead holding too much money will merely lose its purchasing power.

For example, if you hold $30,000 in a US savings account at 0.01% annual growth with over 5% inflation, the new buying power after a year is $28,503.

Your goal is to get money out the door fast to either tackle your debts or funnel toward investments. While I’m not saying forgo emergency savings, I’m merely reminding you that holding on too tightly to cash is not a great bet.

Late Stage Investment Shake Ups

This late stage in the business cycle (see graphic #4) is characterized by moderate growth, credit tightening, earnings under pressure, policy contractions, and new inventory growth and sales growth trailing.

In this phase, there will be a drop in information technology. Anyone over-leverage on tech including indexes that feature tech will take a hit. As the economy slows down, consider Consumer Staples, Health care, Energy, and Utilities.

They usually outperform during the late and recession phases of the business cycle when the economy is shrinking. Also, be aware that Boomers are still retiring every month. This will cause visible drops in the DOW and the SP500 since they are the generation with the most dollars invested and switching toward Bond heavy portfolios.

For my household, this means taking some profits when the market is up from the tech side, holding and buying the violent dips, and shifting toward Consumer Staples, Energy (for dividends) and health care.

Bonus Investment Recession and Inflation Features To Read

How to Recession Proof Your Personal Finances and Investments in Three Steps

It’s unavoidable. Recessions, which are themselves corrections to bubbles, Irrational Exuberance, or other factors outside of our control are a natural occurrence. We have been so fortunate to be a part of one of the largest expansions in US History (over a decade). However, this is likely coming to an end sooner than later.

Other recommendations Include:

A millennial couple increased their net worth from zero to $500,000 in 4 years by making 5 strategic money decisions

In 2017, Doreen and Lawrence had a net worth of zero dollars. Four years later, the couple has built a net worth of around $500,000, according to records viewed by Insider. They’ve also designed a plan to reach millionaire status in the next three years.

Inflation eats up Savings but keep savings lol

Disclosure: This post is brought to you by the Neighborhood Finance Guy. We highlight financial literacy information, resources, and more on your way to money management goals and personal wealth. Our goal is to help you make S.M.A.R.T decisions with our money. We do not give investment advice or encourage you to adopt a certain investment strategy. Your personal finance is up to you. If you take action based on one of our recommendations, we don’t earn a dime as of 5.2021. We operate independently.

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