Advisors’ take: Investing and inflation

Investing & Retirement

Hear from three financial advisors from Truist’s Client Advisory Center.

Let’s face it: Inflation can be worrisome. The good news? A solid investing strategy can be beneficial during periods of high inflation. Your investments can’t avoid market downturns, but they may still perform well if your goals reach far enough into the future.

Just ask Jack Margeson, a Truist financial advisor. He’s seen tough economic times come and go. “The price of entry into the markets is volatility,” he says of high inflation. “That’s why it’s good to be a long-term investor.”

In this Advisor’s Take, he and his colleagues from Truist’s Client Advisory Center share ideas on how to invest through high inflation. But first, let’s talk briefly about inflation

Inflation’s cause and impact

High inflation occurs when the purchasing power of money is drastically reduced by an imbalance in supply and demand1 When you have an economy where too much money is chasing too few goods and services, the value of the latter starts to outpace the value of the former.1 That drives up the price of things like groceries, gas, or your favorite dish from a local restaurant. And if your wages aren’t increasing to match inflation, you may not be able to afford as much as you used to.

Numerous factors affect inflation, like production costs, wages, supply chain disruptions, and government policy.2 Although inflation is a normal part of our economy, a sudden spike may be tumultuous. To help lessen the impact of high inflation on your finances, try these tips.

1. Stay the course

While withdrawing your money might seem like a way to protect your nest egg in the face of high inflation, Yanette Sullivan, a Truist financial advisor, says that pulling your money out in hopes of a better solution may put you at a disadvantage.

She says investors should consider staying the course. “It’s important to truly understand that you’re investing for the long term.”

2. Diversify your investing portfolio

This is investing 101, but it’s worth noting here. Investors who are tempted to remove funds from one investment vehicle in favor of another to shield their money can potentially incur taxes, penalty fees, and other losses that may not be recovered. Instead, Sullivan suggests asset allocation—spreading your investments evenly across asset classes—to better balance risk.

Truist Invest, offered by Truist Invest Advisory Services, Inc., is an automated investing platform that uses asset allocation technology to create portfolios based on investors’ goals, risk tolerance, and time horizon. It monitors your portfolio’s performance and adjusts where necessary to help keep investment aligned with goals.

3. Cash may not be king

The value of your money is declining during a state of inflation, says Ali Mahbod, a Truist financial advisor. He adds that having too much money on hand may not be a smart choice: “If you want to keep up with inflation in this market, keeping assets in cash may not meet your goals.”

That’s not to say you shouldn’t have an emergency fund or a little savings for a rainy day—key components of any financial picture. But consider keeping those funds in a high-yield savings or money market account where interest rates can provide at least some protection against inflation, and the money is still easily accessible. You might also consider CDs or short-term bonds as options.

Mahbod suggests investing any other funds that fall outside of your monthly budget. For new or inexperienced investors, he shares information about robo-advisors like Truist Invest

“Truist Invest may help hedge inflation because your money will have a long-term opportunity for growth,” he explains.

4. Check in with an advisor

Margeson understands his role is part finance and part psychology—and that being a sounding board is just as important as a sound financial plan.

“People who are nearing retirement have been through tough economic periods before, and they’re scared,” he says. Sometimes you just need someone to talk to, and that’s when having an advisor becomes invaluable.

Also offered through Truist Advisory Services, Inc., Truist Invest Pro pairs its robo-advisor with a team of financial advisors like Margeson. They can review your financial plan when you have questions in a trying time and help ensure your goals are still aligned with it.

“Having a well-managed, diversified portfolio provides an opportunity to grow your money through any economic phase,” says Margeson, “so consider investing continuously and letting time work for you.”