After all, performance is king.
Everyone is discussing inflation and how to protect against it. The hedge community's top picks against inflation are gold, silver, and Bitcoin. At One-Signal, however, we see two major issues with these.
- Investors can generate spectacular gains if prices move in the right direction, but one disadvantage is the lack of regular cash-flow. These investments don’t generate any or little returns while holding them
- Even if the value of the investments increase, investors have to sell them so that you can cash in the returns. There are two problems with this:
- Some countries have higher taxes if investments are not held for long enough
- After selling these instruments, investors are sitting on cash, and they have to consider the same thing as before
We believe that a robust and at the same time cash-flow generating portfolio must consist of several layers, with each layer serving its own purpose to make the portfolio as robust as possible on one hand, and on the other hand grow and generate as much regular income as possible.
Therefore, we believe that commodities of all types are an important part of a balanced portfolio that can weather a prolonged inflationary phase. Another essential part of a portfolio are companies with regular and secure payouts. A small part of the invested capital should be kept for special occasions, or for trading.
If inflation continues to rise continuously, individuals will have to think about how to increase the value of their assets at an even fast pace than before, to avoid a loss of purchasing power.
Persistent inflation and money printing by central banks explain rising stock prices. However, this will surely not last forever and the time of awakening will come when central banks will try to control the beast of inflation again. This will result in a sharp decline in share prices, especially for companies with low or no dividends, such as technology firms.
As inflation keeps increasing, most of today’s hip and trendy speculations could suffer immensely, or even get crushed.
And before waiting for this to happen, you should act today…