Investing During Complex Times

While creating a successful investment strategy may be challenging when markets decline sharply, it becomes even more difficult when the economy sputters along with it. This was the environment high-net-worth (HNW) investors faced last year as markets declined while inflation soared.

In this environment, how do you invest in a way that offers a decent potential return to battle the eroding effects of inflation while protecting your investments? While the alternatives may not make up for the record-high annual inflation rate recorded in 2022¹ —the highest in four decades—there are ways to protect your investments and seek a return.

Low Hanging Fruit

You know this already, but a reminder never hurts: Reduce your high-interest debt. If you wonder what this advice is doing in an investing article, weigh how much you pay on any revolving credit card or line of credit loan versus what some investments are earning.

A 7% best-customer rate on your favorite credit card may be low, but doesn’t make sense when markets are down. Get rid of your revolving credit balances—especially today as even best-customer interest rates rise. Then consider investing your savings elsewhere.

Reap Generous Tax Credits

Electric vehicles and energy-efficient home installations, including solar panels, come with generous tax credits provided you meet certain requirements, which differ depending on time of purchase. Other restrictions apply.² This may be a good place to put the money you save by not carrying high interest debt. Your tax professional can provide information unique to you.

Think Long Term

Now consider where you might invest during volatile times. Look ahead and strategize with your financial professional. If an investment still has the favorable long-term outlook it had when you bought it, consider standing pat.

And consider this: An emergency fund that covers as much as two years’ worth of financial responsibilities would make it much easier to withstand short-term volatility.

Fixed Income Looking Up

Now that interest rates have increased, the yields on fixed income investments are climbing, too.

Look for Contrarians

When stock indices fall, some outliers including food and healthcare stocks typically do relatively well because you need their products and services regardless of economic conditions.

Don’t Ignore Dividends

When everything else is equal, a dividend-paying stock or mutual fund* may offer a better total return than one without a dividend. Invest in this type of security because it makes sense, not solely because of the dividend. The dividend should be icing on the cake.

Consider the Alternatives

Alternative investments encompassing diverse assets can be a potential hedge against inflation. They include everything from real estate (in both private and publicly traded forms) and private equity (versus publicly traded) to art, wine and even baseball cards. Recently, a 1952 baseball card featuring legend Mickey Mantle sold for $12.6 million.³ That’s some hedge!

CONSUMER PRICES INCREASED 9.1% IN THE 12 MONTHS ENDED JUNE 2022 -
THE LARGEST INCREASE IN 41 YEARS

U.S. Bureau of Labor Statistics

Look for Value

When you invest for the long-term, you get to buy good stocks when they are undervalued. Ask your advisor to keep on the lookout.

Work with the Pros

In future issues, we will address these and other topics in more detail. But don’t forget to tap your financial, tax and legal professionals to create a financial plan that is specific to your situation.

*Investors should carefully consider the investment objectives, risks, charges, and expenses of the fund before investing. Read the prospectus carefully before sending money. Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won’t guarantee future results. An investment in mutual funds may result in the loss of principal.

¹ bls.gov, July 2022
² cnbc.com, September 2022
³ apnews.com, August 2022