How to fight inflation – On the Money with Jarryd Neves

Jarryd Neves
On the Money. Budding stock market investor Jarryd Neves, of BizNews, sends out an invitation to everyone who wants to ask questions about share investing – but is too embarrassed to ask. Write to [email protected] And tune in for his regular Monday column: On the Money

You may have noticed that inflation in South Africa is rather high. This certainly isn’t good for the majority of individuals, who have to tighten their belts even further in an attempt at simply surviving. As the prices of goods and services increase – like food, transport and housing – your money simply has less purchasing power than it once had.

This isn’t too big of a deal if your pay/remuneration is adjusted to match inflation. But in most cases, this isn’t happening. Most South Africans are now finding themselves having to live on less, as their expenses increase but pay cheques remain the same. It’s also not a bad thing if you owe money to someone or a bank, for example.

However, it’s bad news if people owe you money. Similarly, it affects the elderly/retired who are living off of a fixed income or investments. Inflation eats away at purchasing power, and many elderly people often spend their money on services that increase in price, like carers, home assistance and healthcare.

However, if you’re still working and saving towards a goal, inflation is still a concern for you. Here are some ways to combat inflation and allow you to grow your wealth.

One of the most common ways to beat inflation is to invest in stocks. Of course, in order to do so, you need to be prepared to hold the investment for a long time. According to Forbes magazine, stocks generally outperform long-term inflation – but you must be prepared to commit over many years and have patience. The reason for this is that most companies are able to pass off the burden of inflation to their consumers, leaving their bottom line largely unaffected.

Of course, choosing the right company/companies to invest your hard-earned cash into is also a deciding factor. If you’re unsure on what to do, always take the time to do your research or speak to an accredited financial advisor.

Stocks aren’t the only way to beat inflation, though. For a long time, property has been the investment of choice for many who want to protect themselves from inflation in a safe investment. Of course, Covid-19 has shown us that the property market isn’t invincible – desperate sellers are letting go of properties at record-low prices. But historically, real estate – at the very least – maintains its value or increases over time.  If you’re renting your property out, monthly rental prices generally increase during an inflationary period, earning you extra monthly income.

Gold is also very popular with those individuals who are trying to stave off the effects of inflation. Myriad investors see the precious metal as some sort of alternative to currencies, especially in places where the local currency is shedding value quickly. Although people traditionally flock to play it safe during tough economic times, many experts say that it isn’t a perfect hedge against the effects on inflation.

Have a question about share investing? Write to me at [email protected].

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