Inflation is a reality for most economies and it can have a significant impact on investments. When inflation is high, the value of money decreases over time. This means that if you don’t take inflation into account when investing, you could lose money in the long run.
In this article, we will discuss micro investing and how it can be a valuable strategy during periods of high inflation. We will also provide tips on how to best invest during these times (better get your crypto investing app ready).
But First, What Exactly Is Inflation?
It can be caused by things like rising costs of production, increased demand for goods and services or increases in money supply. In most cases, inflation occurs when the economy is growing rapidly.
Types of Inflation
There are two main types of inflation: demand-pull and cost-push. Demand-pull inflation happens when there is more demand for goods than available supply. This leads to price increases as suppliers try to make a profit.
Cost-push inflation happens when producers face higher costs for inputs (like raw materials or labor), which then gets passed on to consumers in the form of higher prices.
What to Do During Inflation
In order to combat the risks brought about by inflation, it’s important to invest in assets that will maintain their value or even increase in value during periods of high inflation.
For example, precious metals like gold and silver can be a good option during these times. These metals tend to hold their value better than other types of investments, and they can also provide some protection against market volatility.
Another way to combat the effects of inflation is to invest in assets that produce a steady stream of income. This can help you maintain your purchasing power even if the value of money decreases over time.
Income-producing assets like bonds and dividend stocks are a good option for this type of investing. They tend to provide stability and consistent returns, which can help offset the impact of inflation.
Another good option is real estate. Unlike stocks or bonds, real estate is a tangible asset that tends to be less affected by inflation.
How About Micro Investing?
Another good option for investors during periods of high inflation is micro investing. Micro investing is a strategy where you invest small amounts of money into a variety of different investments. This can help reduce the overall risk of your portfolio and also allows you to take advantage of opportunities that may otherwise be unavailable to you.
Micro investing is a great way to spread your risk over multiple investments and reduce the overall impact of inflation on your portfolio. By investing in assets that have a history of performing well during high inflation periods, you can help safeguard your investments against rising prices.
Remember, diversification is also key. Make sure to spread your money across different asset classes! This will help reduce the risk of your portfolio if one or more of your investments perform poorly during an inflationary period.