You're not imagining it — prices are high. Inflation reached its highest rate since 1981, at 9.1% in June 2022. Chances are you're feeling the pinch in some way and are looking for strategies to weather this period.
Why not look at what some of the richest business leaders have said about their inflation strategies? Elon Musk, Bill Gates, Warren Buffett, and others have some advice worth considering when it comes to smart investments.
Put it in real estate
SpaceX CEO Elon Musk has tweeted his support for putting your money into physical items, including homes. Musk has been cagey at times about his wider strategies for dealing with inflation, but his point about putting his money into real estate has merit.
Right now prices are high for houses, but if you have the money, it's a solid investment. That can be buying a home for the first time, or turning a portfolio of homes into rental properties.
On the opposite end, if you already have a real estate portfolio, consider taking advantage of inflation and high prices. Right now the home market is a seller's market, with prices on the high end of a rise over the past few years.
If you're OK parting with some of those properties, you might make a solid profit now as homes are seriously in demand.
Find an index
If inflation has you down, but you have plenty of cash, find an investment to put it in. There are several volatile stocks or cryptocurrencies out there, some promoted by billionaires like Musk, but there are also many reliable, safe investments you can make.
Warren Buffett advocates choosing an index fund and investing in that. The costs are typically low and the S&P; 500 includes the largest companies, including Coca-Cola and Alphabet could leave you with a little less worry.
Pro tip: To make the most of your investments, make sure you work with one of the best brokerage accounts.
Find a product that's got “pricing power”
AriZona Iced Tea infamously is refusing to raise its prices above 99 cents, despite rising production costs, but Warren Buffett suggests a different path.
Buffet says to look for companies that command “pricing power,” meaning they have the ability to raise their prices to meet inflation without losing business.
Study the leading companies in their fields. Are their market shares so strong that they can risk a price increase without cutting into their business? Those are the ones you might invest in.
Put it into production
If the cost of goods is going up, consider going to the source. Farmland or manufacturing could be a smart investment. Yes, overhead might fluctuate with the prices, but these are sources of production that will always be in demand and might weather the ups and downs of the wider economy.
Get a TIP
Treasury Inflation-Protected Securities, or TIPS, are having a bit of a moment right now as prices rise. Bill Gates has advocated for these for the past decade. Simply put, they're linked to the Consumer Price Index, so as prices rise and fall, so do the TIPS. They are Treasury bonds, and therefore backed by the U.S. government, so people tend to turn to them in times of uncertainty.
The downside is that these won't be high-yield, big money-making investments. TIPS pay interest twice a year at a fixed rate. The rate rises with inflation and declines with deflation.
Diversify your portfolio
It's a straightforward step, but one that not everyone takes. Low-risk indexes and TIPS and real estate are both good, but don't expect a single stock or asset to be the total solution to inflation concerns and economic downturns. Inflation is hitting the economy hard now, but some industries are feeling it more than others, and that is also changing over the months.
A diversified investment portfolio helps keep your money spread out over different sectors. When one area takes a plunge, another sector might benefit. And, should the overall economy improve and boom, a wider investment portfolio could mean wider gains in the good times.
Although billionaires likely don't have the same budget concerns you do or feel the squeeze from inflation, they often do know the best investing strategies. Consider their recommendations and consider your needs.
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