Opt for Classic Stocks instead of Momentary Trends
Opt for Classic Stocks instead of Momentary Trends
There's a lot of controversy over the best methods to protect against inflation. This stems from the general agreement that future policies will only worsen it. Disregarding the fact that consensus viewpoints are often incorrect, it's generally unwise to employ trendy, reactive strategies for macroeconomic forecasting.
Experts are loaded with fresh suggestions—many of them driven by Wall Street's marketing machines—to put money in "inflation-protected" ETFs, take a gamble in crypto, buy gold, or experiment with derivatives. As Warren Buffett would clarify, none of these are the best methods to prepare yourself for inflationary periods. Buffett has been advocating for inflation in his shareholder letters since the 1960s, and his approach has never shifted (to the benefit of his shareholders). His recommendation has always been, and remains: invest in stocks of companies with pricing power. In other words, firms that can transfer their price increases to consumers. As he frequently explains, there's nothing like a corporation with a robust competitive advantage when money is losing its value.
Yes, gold (or digital gold) has its day in the spotlight when prices soar. Yes, derivatives can pay off in various inflationary scenarios (provided the counterparty is financially sound enough to pay — a significant if). Yes, there are a plethora of Wall Street-inspired tricks in the making (all eager to access your funds). But none of that is as successful in the long-term as a vintage, profitable business that generates income the vintage way.
Therefore, disregard the trends, the promotions, and the misguided ideas. Stocks have the highest return of any asset category over time. Stocks of companies with pricing power have even better returns. It's true that we're due for a correction in stock prices, but that provides an ideal opportunity to enhance investments. As we've observed countless times, every market downturn leads to new prospects. The key is to remain an investor, not a speculator.
Fads like investing in crypto or derivatives might attract attention during inflation, but Warren Buffett advocates for investing in stocks of companies with pricing power to weather inflationary periods effectively. Despite the current controversy over inflation-protected strategies, stocks have historically proven to have the highest return of any asset category over time.
In light of Buffett's long-term strategy, employing trendy, reactive methods during inflation could potentially be misguided, and stocks with pricing power may provide a stronger cushion against inflation's impact on purchasing power.