What’s the tax you didn’t you know you’re paying? Inflation!

Inflation happens when the Federal Reserve prints more money and puts it into circulation. Everyone ends up with a little more money, which makes them feel comfortable spending more, which ultimately raises the prices of everyday goods. So while you may have more money, you’ll also have higher expenses. Your spending power remains about the same, because more money in circulation means more dollars competing for the same goods and services.

One way to protect against inflation is to own equities. Equities are stocks, mutual funds, and ETFs that are based on owning companies within the United States or around the world. One thing that leaves you more vulnerable to inflation is owning bonds or treasury bills or holding on to large amounts of cash, because these all earn a fixed return.

Equities help hedge against inflation because they don’t earn a fixed rate. Instead, the return on your equity holdings will grow along with inflation and preserve your buying power in the future. Basically, when inflation is high, stocks are good & bonds and cash are bad.

If inflation rates have you worried about your financial future, especially if you’re approaching retirement, schedule a meeting with one of our financial planners below. We’re here to help.