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How To Protect Your Money Against Inflation
One of the most mentioned topics in the media these days is inflation, as prices continue to rise and markets continue to be impacted.
Learn more about the basics of inflation, how it affects your purchasing power, and, more importantly, how you can protect your money against it.
Learn more about the basics of inflation, how it affects your purchasing power, and, more importantly, how you can protect your money against it.
The basics
- What is inflation?
Put simply, inflation happens when there is an increase in prices of most products and services of daily use such as food, clothing, housing, leisure and transportation.
- What causes inflation?
Inflation is caused by an increase in the money supply. This increase in money supply can lead to workers demanding higher salaries, which in turn pushes up wages and results in increased labor costs. These rising costs then create a higher price cycle which leads to an increase in the cost of living.
- How does it affect your finances?
Your purchasing power decreases. This means that the same amount of money will buy you less things than it used to a few months ago.
- How can you protect your money?
Adopt a long term financial strategy that allows your money to both balance out the impact of inflation while actually increasing its purchasing power overtime.
A key strategy to protect your wealth is long-term investing.
Use a diversified portfolio that helps protect your wealth and can even grow your net worth. Here is a mix of asset classes that tend to outperform the market during inflation:
1- Stocks
2- Real Estate
3- Commodities
4- Gold
1- Stocks
Publicly traded companies may weather the inflation storm better than the average consumer, and depending on the nature of the business, may even profit from inflation activity.
2- Real Estate
Along with the prices for other goods and services, inflation may drive up real estate prices, which is a win for anyone with real estate holdings in their portfolio. Not only will the value of the property (or properties) increase, but so could the rental income.
3- Commodities
Commodities are widely considered to be a solid hedge against inflation. A commodity is a term for a basic good. Examples of commodities include grain, natural gas, corn, and beef. Traditionally, commodity prices have picked up when inflation is rising, making them an attractive investment in an inflationary environment.
4- Gold
Gold also falls under this commodity category and is considered by many to be a good option for protection against market fluctuations.
About SmartWealth
SmartWealth is an online financial advisor built and established by NBK Capital (Watani Investment Company KSCC), a leading investment management firm in the MENA region. Our technology enables us to deliver expert insight into tailored solutions for your investment needs.
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