Here are 3 things to do to protect your buying power against inflation:
1. Own Perpetual Dividend Raisers
These are stocks that raise their dividends every year. If you’re receiving more income from your dividend stocks each year, you should be able to maintain and hopefully increase your buying power instead of seeing it decay due to inflation.
2. Keep fixed income maturities short term.
Don’t lock fixed income products for years. If you’re earning 4% on interest income while inflation is above 8%, you’re losing buying power. If your maturities are short, you’ll be able to reinvest the cash as it matures at higher rates.
3. Look for variable-rate products that are linked to inflation
There are bonds whose rates are variable depending on inflation or other factors. This will maintain your buying power as inflation rises.
Take the steps above to make sure rising prices don’t destroy your buying power.
Sven Franssen