Investing When Inflation is Running Hot

Over the past couple of months, the US has witnessed surging inflation, unlike nothing we’ve seen in the past decade. Most people will have noticed their grocery bill has gone up even though they’re buying the same amount of food. While the rise in essential commodity prices can primarily be attributed to the world opening back up again and partly the Ukraine crisis, it’s time we accept that inflation is upon us. Unfortunately, nobody knows how long it will last or just how we should react. And if you’re an investor like most of us are, you’re likely more concerned about your money losing value in the market.

Although nobody enjoys inflation times or the consequences of inflation, if you’re an investor, you need to think of inflation as an opportunity to reexamine your entire portfolio. One of the best ways to tackle inflation in your portfolio is to always ensure you’re properly diversified. The more diversified you are, the less likely you are to feel the inflation pinch. In general, inflationary periods are arguably the best times to revisit your financial situation and make adjustments where necessary. And if you’re a long-term investor, inflation is just a bump on the road that should not be a major source of concern. 

Cryptocurrencies Versus Gold During Times of Inflation

One of the key investment arguments for cryptocurrencies such as Bitcoin has been their ‘immunity’ to geopolitical uncertainty and inflation. However, what we’ve seen so far in 2022 is anything but. For example, the price of bitcoin fell to a two-week low immediately after Russian President Vladimir Putin ordered troops into Ukraine in early March 2022. Further, now that the US is experiencing inflation at historic highs, you’d expect this would be crypto’s time to shine. Instead, most cryptocurrencies are experiencing record lows. Bitcoin, for example, was at an all-time high in November 2021 when it hit the $69,000 mark. However, as of March 2022, the cryptocurrency had lost almost half of its value since the November high. 

On the other hand, just like it always does during times of uncertainty, gold has already registered an 11.70% rise in 2022. That said, is it now time to question cryptocurrency’s status as a form of “digital gold” now that it’s failing to live up to expectations when it’s needed the most?

Links and Resources: Treasurydirect.gov