Inflation Resistant Stocks have become the go-to option for investors all over the world in 2022 as the inflation rate continues to rise. High Inflation basically means that consumers will experience higher prices on goods and services and a loss of purchasing power. For investors like you and I, it means moving some of our money to assets that benefit from inflation or at least keep up with its pace. So let’s have a look at some of these investments. Ready?
- Inflation Resistant Stocks
Rising interest rates are generally bad news for most stocks, but certain ones are negatively impacted more than others. So which inflation resistant stocks can you buy now?
Make sure you Avoid Growth Stocks which are particularly sensitive to rising interest rates. Growth stocks are shares of companies that are expected to grow at a rate more than the market average. Basically, these are companies that are growing their share prices, revenue, profits, or cash flow at a faster rate than the market at large. Value stocks tend to perform better than growth stocks in high inflation periods, and growth stocks tend to perform better during low inflation. With this in mind, the best inflation resistant stocks to buy now are Value Stocks.
Consider investing in Dividend Stocks. A dividend stock is a publicly traded company that regularly shares its profits with shareholders through dividends. These stocks can be a lucrative form of passive income, plus they hedge against inflation and ensure that even though the share price might be falling, you still get some consistent income from your investment.
- Growth Stocks – Tesla, Shopify, Netflix, Amazon, Alphabet inc. (Google)
- Value Stocks – Berkshire Hathaway, NVIDIA Corporation, AT&T Inc, Pfizer Inc, Procter & Gamble Company.
- Dividend Stocks – Xerox Corp, Chevron Corporation, Johnson & Johnson, JPMorgan Chase & Co.
Energy Stocks are also good inflation resistant stocks you can buy. Since 1973, energy stocks have been the top-performing sector during periods of high and rising inflation. This trend has certainly held true in 2022. Most of the top-performing stocks in the S&P 500 this year have been oil and gas companies. Look at the returns of various sectors in the S&P 500; as you can see, only the Energy sector has had a positive return of 1.15%.
Invest in Defensive Stocks. These are stocks that provide consistent dividends and stable earnings regardless of the state of the overall stock market. Defensive sectors are parts of the economy that historically, have typically held up well in downturns. The main defensive sectors are generally considered to be utilities, health care, and consumer staples, all of which have outperformed the broad market so far this year.
Consumer staples stocks are definitely good stocks to buy now because they do well during high inflation as price increases are passed on to consumers. As producers of essential foods, Most Agricultural Stocks are considered Consumer Staples, meaning that demand for their products is not affected by the broader economy.
2. Commodities like gold, oil
For centuries, the leading safe haven has been gold causing prices to rise as inflation rises. Gold can also be purchased directly from a dealer or indirectly by investing in a mutual fund or exchange-traded fund (ETF) that owns gold.
Example of a Gold ETF on the HISA APP – iShare Gold Trust ETF (IAU)
3. Real Estate
Real estate is a popular choice because it becomes a more useful and popular store of value amid inflation while generating increased rental income. Investors can buy real estate directly or invest in it by buying shares of a real estate investment trust (REIT).
Examples of REITs on the HISA APP
- JPM BETABLDRS MSCI US REIT (BBRE)
- VANECK MORTAGE REIT (MORT)
- iShare Cohen & Steers REIT ETF (ICF)
- Sabra Health Care REIT Inc (SBRA)