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Best Investments To Beat Inflation – Forbes Advisor – Forbes

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Rising prices have become an unavoidable fact of life for most Americans. You hear about inflation in the news, you see it at the grocery store—and hopefully you’ve thought about how inflation is impacting your investments.

“Inflation is the silent wealth killer,” says Chris Berkel, investment advisor and founder of AXIS Financial in Edmond, Okla. “Inflation has the potential to erode the purchasing power of an investor’s portfolio, even if they maintain positive returns year-over-year.”

Your long-term investments will need to earn at least 3.7%, the average U.S. inflation rate going back to 1960, to keep from losing ground. Here’s a look at investments that have stood the test of time in helping investors combat inflation.

Beat Inflation by Investing in Gold

Gold is the oldest hedge against inflation. The yellow metal has seen an average annual gain of 9.48% over the 20 years between September 2001 and September 2021. Over the same period, inflation averaged 2.4%, netting investors a 7.08% rate of return.

Just don’t go dumping your life’s savings into gold, as there are some other factors you’ll need to understand about investing in gold.

If you invest in physical gold, there are additional costs in storing and insuring coins and bullion, which eat into your returns. Investing in gold-focused mutual funds and exchange-traded funds (ETFs) can vastly reduce these costs, but it’s still important to remember that the price of gold is highly volatile, especially over the short term.

You’ll also need to understand whether your fund of choice aims to track the price of gold or rather gold mining companies. Both can be decent ways to play the gold market, but their returns may vary considerably.

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Invest in Stocks to Beat Inflation

Investing in a diversified portfolio of stocks is an excellent way to fend off inflation. From September 2001 to September 2021, the S&P 500—a key benchmark for U.S. stocks—generated an average return of around 9.5% (with dividends reinvested). After accounting for inflation, you’re still looking at about 7% average annual returns.

Even with today’s substantial price gains, you’d still have soundly trounced rising prices: From November 2020 to November 2021, inflation rose almost 5%. During the same period, the S&P 500 jumped over 32%, with dividends reinvested.

There’s no real need to resort to picking individual stocks, which can be research intensive and incredibly risky, to benefit from this kind of historic growth. Get started by choosing an S&P 500 index fund or S&P 500 ETF, which track the index’s return and keep costs ultra low. Because they contain hundreds of stocks, they provide simple, low-cost diversification, which reduces risk and portfolio management headaches.

Remember, investing in stocks is never risk free. You may lose money in the short term, and with stock index funds you don’t get to choose what companies the fund invests in. If you’re concerned about keeping your money out of companies you don’t agree with ethically, consider choosing an environmental, social and governance (ESG) fund instead.

Beat Inflation with Real Estate

Many inflation-averse investors turn to real estate to hedge their holdings, although the size and variability of the market can make it very difficult to generalize about this particular asset class.

An analysis by the Massachusetts Institute of Technology (MIT) found that retail property has proven to be the best category of real estate to beat inflation, while apartment buildings and industrial properties did somewhat less well. The MIT analysis attempted to factor in inflation growth, maintenance costs and appreciation when deciding what kind of real estate performed best over the long term.

Owning single-family homes can provide a hedge against inflation, depending on local market conditions. Taken in aggregate, home values in the U.S. have seen 4% average annual growth since 1991, according to the Federal Housing Finance Agency. But this data does not factor in maintenance or any other costs.

Here’s the trouble with buying real estate: It requires big buy-ins and a variety of costs for financing and maintenance. That’s why real estate investment trusts (REITs) can provide a simple way for regular investors to diversify their portfolios and get the inflation hedging benefits of real estate.

When you invest in REITs, it’s like buying a fund that exclusively owns real estate assets. Regulations require them to pay out regular dividends, making them particularly appealing to income investors.

And REITs have historically offered strong performance: As of November 2021, the MSCI U.S. REIT Index is up almost 32% for 2021, and its average annual return over the past decade has been 10.90%. That’s a great way to beat inflation.

TIPS Are Designed to Beat Inflation

Treasury Inflation-Protected Securities (TIPS) are designed to protect your investment from rising prices. The U.S. Treasury sells TIPS and adjusts their par value each year to keep up with inflation. This boosts your interest payments, and it also ensures you’ll likely see some appreciation from inflation-adjustments too.

While the inflation-protection aspect of TIPS can make them appealing, just remember that they’ll really only be able to preserve purchasing power, not necessarily provide growth. Over the past 10 years, the iShares TIPS Bond ETF, which tracks a TIPS index, posted average annual returns of just over 3%.

If you invest in TIPS, you’ll also need to watch out for deflation. Though you’ll never receive less than the original par value of a TIPS when it matures, its value can still decrease while you’re getting interest payments.

Beat Inflation with I Bonds

Series I savings bonds, better known as I bonds, are another government-issued security designed to beat inflation.

Like TIPS, they preserve your money’s purchasing power by making regular interest adjustments based on prevailing inflation. Unlike TIPS, they don’t tinker with the par value of your bond; instead, they change interest rates every six months based on current inflation.

That can work out pretty well for you these days. Interest rates are over 7% until at least April 2022. But I bond interest rates change constantly and can go to zero. That means that though you’re guaranteed not to lose your initial investment, it still can be eaten away over time by inflation if interest rates fall.

What’s more, I bonds come with pretty hefty lock-in dates. You can’t cash out an I bond for at least a year after you buy it, and for the next four years, you’ll owe three months of interest as a penalty if you cash it out, much like a certificate of deposit (CD).

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U.S. insurer Travelers posts record profit on investment returns – Reuters

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Jan 20 (Reuters) – Property and casualty insurer Travelers Cos Inc reported a record quarterly profit on Thursday as higher returns from its investments cushioned the hit from a rise in catastrophe-related claims.

The New York-based company, a component of the Dow Jones Industrial Average Index (.DJI), is seen as a bellwether for the insurance sector as it typically reports before its peers.

The insurer said it earned a core income of $1.29 billion, or $5.20 per share, in the fourth quarter ended Dec. 31, compared with $1.26 billion, or $4.91 per share, a year earlier.

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Analysts on average had expected a profit of $3.86 per share, according to Refinitiv IBES data.

Travelers’ pre-tax net investment income jumped 10% to $743 million, driven by higher returns on its private equity and real estate partnership.

Its net written premiums rose 10% to $7.9 billion.

Travelers said the catastrophe losses it incurred in the quarter mainly stemmed from tornado activity in Kentucky, windstorms in multiple U.S. states and a wildfire in Colorado.

Devastation from tornadoes that slammed parts of the United States in December are expected to push the insurance industry’s 2021 bill for weather-related claims well above the predicted $105 billion, industry experts have said. read more

Travelers reported a combined ratio of 88%, compared with 86.7% a year earlier. A ratio below 100% means the insurer earned more in premiums than it paid out in claims.

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Reporting by Noor Zainab Hussain in Bengaluru; Editing by Aditya Soni

Our Standards: The Thomson Reuters Trust Principles.

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Darren Herft believes ETFs present a unique investment opportunity – Net Newsledger

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Darren Herft

Exchange traded funds (ETF) are securities that track a sector, commodity, or an index. Unlike mutual funds that can only be traded once a day, Exchange traded funds (ETF) prices fluctuate all day, much like specific stocks being exchanged on the stock market. 

According to veteran investor Darren Herft, ETFs have opened a new vista for investors as they can be traded on most stock exchanges in the same way as regular stocks. 

“Exchange traded funds (ETF) can be organised to track a diverse array of investments, ranging from individual commodity prices to any number of securities,” says the Australian entrepreneur. 

“They can be designed to track investment strategies!” he adds. 

Darren Herft believes that the lower expense ratios coupled with lower brokerage fees makes them a lucrative option for investors looking to diversify their holdings. 

“For investors looking for more liquidity, Exchange traded funds (ETF) provide a better avenue than mutual funds,” says Darren Herft. 

He believes that in many ways, Exchange traded funds (ETF) hold an edge above stocks. 

Darren Herft says, “Rather than holding only one asset like a stock, Exchange traded funds (ETF) hold multiple assets and that has helped their popularity.”

A single Exchange traded fund (ETF) could have numerous stocks under its umbrella. While some are nationally focused, others are global. 

Darren Herft says that even within the Exchange traded fund (ETF) world, there are various options for investors to consider. 

“Their utility can range from income generation to hedging or partly offsetting risks in an investor’s arsenal,” says Herft. 

He thinks that more fiscally conservative investors might find Bond Exchange traded funds (ETF) to be suited to their needs and temperament. Bond Exchange traded funds (ETF) provide regular income to their holders depending upon the performance of the bonds under their umbrella. 

“Bond ETFs could have government bonds, corporate bonds or municipal bonds in their ambit and unlike bonds, they don’t have a maturity date,” says Herft. 

Herft says that more risk-tolerant investors might find their match in Stock Exchange traded funds (ETF). Consisting of a basket of stocks that track a whole sector or industry, they provide an investor with a uniquely diverse portfolio with established high performers coupled with newer stocks with growth potential. 

“It’s a good collection of stocks and investors don’t have to worry about high fees associated with stock mutual funds,” adds Herft. 

Other types of Exchange traded funds (ETF) include Industry ETFs, Commodity ETFs, Currency ETFs, and Inverse ETFs. Herft thinks that the most attractive quality of this investment vehicle is its ability to be diverse and specialized at the same time. 

While the AFL aficionado believes that Exchange traded funds (ETF) can be a useful vehicle for many investors, he is of the opinion that they should not be put on a pedestal.

“As with any investment, there are pros and cons and I would recommend anyone looking to invest in anything to do their own independent research and consult experts if they can, before making a decision,” he adds.

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Feds announce $3M investment for Calgary’s Energy Transition Centre – Globalnews.ca

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As Calgary attempts to become a centre for a transitioning energy industry, a new hub that focuses on clean energy in the city’s downtown core has received a major boost.

Federal ministers, along with Calgary Mayor Jyoti Gondek, were on hand Wednesday to announce a federal investment of more than $3 million towards the clean technology sector in Alberta, including more than $2.1 million to help fund the Energy Transition Centre.

Another $900,000 is earmarked for the Foresight clean technology accelerator, to provide training and investment attraction for Alberta clean technology companies.

Read more:

Getting regulations right key to unlocking Alberta’s next energy economy

“We are moving in the direction of seriously harnessing the potential of Calgary’s energy sector — the technology that we have resident in this sector for the future of the energy second,” University of Calgary chancellor Deborah Yedlin said. “This is our Wayne Gretzky moment, we’re asking towards where the puck is going.”

The Energy Transition Centre will take up an entire vacant floor at the Ampersand building in Calgary’s downtown core.

Barring any issues with COVID-19, officials said the plan is for the centre to open on March 1.


Click to play video: 'IEA head says Canadian oil industry can be part of energy transition if it gets cleaner'



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IEA head says Canadian oil industry can be part of energy transition if it gets cleaner


IEA head says Canadian oil industry can be part of energy transition if it gets cleaner

“This innovation hub will help small- and medium-sized businesses develop clean energy technologies that will help meet a growing global demand for environmentally-friendly products and processes,” said Daniel Vandal, federal minister responsible for Prairies Economic Development Canada.

According to officials, the Energy Transition Centre is set to be a space to connect Canadian energy companies with clean energy start-ups, innovators and investors with access resources and experts in the field.

Federal officials hope the centre helps to create 25 new businesses in the clean energy sector over the next three years.

Read more:

Alberta needs billions more to invest in energy transition: study

Calgary’s mayor said the investment provides both a boost to the city’s efforts to become an energy transition hub as well as its work to revitalize the downtown core.

“We are seeing bold, innovative and collaborative ideas coming forward that are inspired by entrepreneurial Calgarians,” Gondek said. “This will be a catalyst for success in terms of Calgary’s leadership in climate protection and energy transformation, as well as our downtown revitalization.”


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From lithium to hydrogen: How Alberta hopes to power the new energy future


From lithium to hydrogen: How Alberta hopes to power the new energy future – Jan 6, 2022

According to a study on energy transition released in December, a clean energy sector could create 170,000 jobs and contribute up to $61 billion to the province’s GDP by 2050.  However, the study also estimates a path to net zero would need $2.1 billion in annual investments by 2030, increasing to $5.5 billion by 2040.

Although Wednesday’s announcement was encouraging for some experts, there is some belief that policy changes and not just funding will be key to a successful clean energy sector in the province.

“There are ways that governments can use financial tools to provide guarantees that can stimulate a lot more investment to prove out new technologies, and also to make sure that support is structured fairly,” University of Calgary sustainable energy development masters director Sara Hastings-Simon said.

“We’re going to be in a world that looks very different from an energy perspective in just a couple years from now, and so we don’t have a lot of time really left to wait — we really need to be preparing now for that future.”

The investment was also welcomed by Alberta’s opposition NDP, who were also critical of the notable absence of the provincial government during the announcement.

“There is zero investment from the province in this initiative. Why is the UCP ghosting Alberta’s efforts to diversify the economy and promote clean energy?” NDP energy critic Kathleen Ganley said in a statement.

Read more:

‘Elon is watching us’: Calgary woman uses nanotechnology to create new lithium extraction technology

A spokesperson for the Ministry of Jobs, Economy & Innovation said the province wasn’t involved in the announcement because there was no provincial funding for the initiative.

“We remain committed to responsible energy development, reducing emissions and supporting jobs,” Alberta government spokesperson Tricia Velthuizen said in a statement to Global News. “Through innovation and technology, industry can continue to reduce emissions, even with increased oil and gas production.”


Click to play video: 'Kenney touts energy industry success at Chamber of Commerce speech'



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Kenney touts energy industry success at Chamber of Commerce speech


Kenney touts energy industry success at Chamber of Commerce speech – Dec 8, 2021

According to Vandal, the federal government is looking at projects with Alberta’s provincial government and that both are “aligned on job creation and diversifying the economy.”

“Those consultations and communications are occuring,” Vandal said. “All levels of government need to be on the same page.”

© 2022 Global News, a division of Corus Entertainment Inc.

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