Q. I am about to retire, how to prepare my retirement investment against the threat of inflation?
A. Inflation is a risk that most retirees should be worried about, but if the inflation rate has been pretty low, why worry about it now?
The reason is, despite the actual level of inflation might be low - for example, in the upper 1% or low 2%, what's the most damaging for investment portfolio is the surprising uptick of inflation, because stocks and bonds have factored in low interest rates, but if there is a surprising uptick of inflation, the Fed is going to adjust the interest rates more aggressively, which will drive down both stocks and bonds' prices.
How do you hedge against inflation? We will discuss 4 tools in our next blog post.
A. Inflation is a risk that most retirees should be worried about, but if the inflation rate has been pretty low, why worry about it now?
The reason is, despite the actual level of inflation might be low - for example, in the upper 1% or low 2%, what's the most damaging for investment portfolio is the surprising uptick of inflation, because stocks and bonds have factored in low interest rates, but if there is a surprising uptick of inflation, the Fed is going to adjust the interest rates more aggressively, which will drive down both stocks and bonds' prices.
How do you hedge against inflation? We will discuss 4 tools in our next blog post.
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