1. I would be wary of making any major changes for two reasons. First, the portfolio should be designed to account for some inflation. Second, changing a portfolio typically involves recognizing capital gains and paying taxes. However, small changes such as reducing the duration on the bonds or increasing an allocation to TIPS might be helpful.
— Seth Benjamin Mullikin, Lattice Financial, Charlotte, North Carolina
2. I don’t worry about moderate Inflation when thinking of a long-term savings plan. Fortunately, through a maximally diversified portfolio properly constructed using low-cost index funds, inflation can be hedged in the near term, intermediate term, and long term.
Treasury Inflation-Protected Securities (TIPS) serve to hedge against Inflation in the near term, intermediate duration bonds serve to hedge against Inflation in the intermediate term, and stocks have shown to be an excellent hedge against Inflation in the long term.
I am not a fan of adding commodities to a portfolio because they are non-income-producing assets and therefore cannot be expected to provide the portfolio with a positive return above the inflation rate and are thus not worth including.
— Anthony Watson, CFP, founder and president, Thrive Retirement Specialists, Dearborn, Michigan
3. With inflation numbers where they are, young people are at a huge risk of losing their purchasing power. The need to invest is increasing dramatically, and the portfolio can’t be 60/40 with bonds yielding low returns. Most young people have a [larger] appetite for risk compared to previous generations, and many will have tilts to crypto, real estate, etc. to try and stay ahead of inflation.
— Thomas Kopelman, co-founder and financial planner, AllStreet Wealth, Indianapolis, Indiana
4. I have been suggesting my clients invest in private real estate through alternative asset manager Blackstone. In particular many clients have been very happy with the Blackstone Real Estate Income Trust (BREIT). This investment has had a great year and provides income, diversification and appreciation of the underlying real estate.
— John Bovard, CFP, owner, wealth advisor, Incline Wealth Advisors, Cleves, Ohio
5. We have had exposure to real assets (infrastructure & real estate), floating-rate bonds (where the interest rate isn’t set and can keep up with rising rates), and quality stocks (companies that have pricing power and can pass on an increase in costs to consumers). We expect that those three asset classes are positioned to do well in a rising inflationary environment.
In addition, we are actively evaluating mid-cap equities and commodities to determine if that asset class makes sense long term. Our clients that can take on additional risk have allocated to crypto as an inflation hedge.
— Simon Tryzna, CFA, chief investment officer, wealth advisor, ClearPath Capital Partners, San Francisco
6. In the fixed income and bond portion of a portfolio, I currently recommend a larger allocation to Treasury Inflation-Protected Securities (TIPS) using the Vanguard ETF VTIP. This fund has a very short duration so it tracks inflation more closely. I also recommend holding more cash to rebalance in the future because it’s unclear how bonds will perform given potentially rising rates. Another attractive location for emergency funds or fixed income is purchasing I-bonds from the Treasury, as they are currently yielding over 7%. And finally, stocks historically perform well in environments of high inflation, as consumers pay more for goods (more revenue for businesses) which keeps up with the rising business costs.
— Michael W.S. Morton, CFP, Morton Financial Advice, Harvard, Massachusetts
7. Even when inflation tapers off over time and supply side problems subside, there is no knowing if the prices of raw materials to the prices of residential real estate (your house) will rapidly reset down to pre-pandemic prices a few years from now.
We have deployed common “anti-inflation” asset classes in our client’s strategic diversified portfolios including both taxable and municipal TIPS, floating rate bonds and floating preferred stocks, as well as commodity, oil, energy and REIT ETFs.
On our more conservative risk portfolios we have pivoted a bit to more S&P 500 weighted funds as stocks provide an excellent hedge against inflation while at the same time helping to protect against bond losses as interest rates may continue to increase over time.
— Jon W. Ulin, CFP, CEO, Ulin & Co. Wealth Management, Boca Raton, Florida
8. I am overweight in the consumer staple sector. I focus on companies that have the ability to shift rising costs to the consumer. It is best when you can gather a reasonable dividend too. Also — energy exposure, especially oil, is a good hedge. With gas prices soaring, this conversation sits well with clients. It makes the rising gas prices less salty when you own oil exposure.
— Tyler E Smith, CFP, advisor, BBK Wealth Management, Noblesville, Indiana
9. I've always had a small, i.e. 5-10%, allocation to commodities in most client portfolios as an inflation hedge. If you believe that the bond side, in particular, of a portfolio is exposed to higher interest rates through rising expectations for inflation, or through the Fed's response to them, then it makes sense to have something in the portfolio that has correlated very strongly with inflation in the past, i.e. commodities.
On the bond side of the equation, I've been tilting portfolios to exposure that is shorter in duration, i.e. less sensitive to moves in interest rates, and lower in credit quality. And on the equity side of the portfolio, I've been tilting portfolios to value and away from growth.
— Paul N. Winter, CFP, founder, Five Seasons Financial Planning, Salt Lake City
10. In a time of rising inflation and the risks associated with simply owning dollars, combined with low (and negative) interest rates on bonds, astounding multiples on stocks, and feverish home prices, Bitcoin appears to be a life-raft next to the Titanic that is taking on water through a series of gaping holes. Unlike USD (or any fiat) that can be printed, manipulated and used as a political weapon, Bitcoin is free from individual or governmental intervention (manipulation).
Further, the protocol of Bitcoin allows transparency of the amount of existing Bitcoin as well as new Bitcoin that will be introduced over time. These attributes are a few of the key reasons that we use Bitcoin as a means of protecting our clients’ portfolios from inflation risk.
— Jim Crider, CFP, financial planner, CFP, CEO, Intentional Living FP, New Braunfels, Texas
11. Inflation is a normal occurrence, so a long-term investor would normally factor that into portfolio construction/models along the ups/downs of interest, economy, etc. Portfolio changes (knee-jerk reaction) in response to higher inflation sounds good in theory, but on average is about as unsuccessful as timing the stock market.
— David N. Bize, First Allied, Dallas, Texas