How To Beat Inflation In 2024: 10 Expert Tips

In March 2022, the inflation rate climbed to 8.5% (based on the US Labor Statistics consumer price index data) - the highest we’ve seen since 1981. It looks like the rising prices of consumer goods are here to stick around.

Such huge inflation spikes contribute to market volatility and economic instability, creating turmoil in the traditional stock market. In turn, investors seek new investment opportunities that will help them hedge against the risks that come with rising inflation.

So, if you’re looking for proven strategies that will help you beat inflation in 2024, you’ve come to the right place! 

(We’ll also reveal how Vinovest can help you invest in fine wine - one of the most inflation-resistant alternatives right now.)

How to Beat Inflation in 2024: 10 Tips from The Experts

While the Central Bank usually encourages low inflation rates of 2-3% through adopting different monetary policy strategies, an inflation rate hike of 8.5% can throw the economy and your portfolio off balance. 

Here’s how you can beat the record-high inflation trend this year:

1. Diversify Your Portfolio with Alternative Investments

One of the most vulnerable asset classes in times of inflation is cash. For example, if you hold $500,000 in cash, considering an inflation rate of 8.5%, you’ll lose $42,500 in purchasing power. 

So, a great way to avoid such financial losses is to put your money in alternative investments such as:

• Real estate
• Oil
• Gas
• Fine wine
• Alternative mutual funds

Such alternatives are usually less volatile to the market turmoils. 

For example, the fine wine asset class has proven to be a great hedge against inflation, showing stable growth even during economic instabilities. 

It is also one of the best luxury good alternatives. While the S&P Global Luxury Index has decreased by 8% in the past year, fine wine portfolios increased by 5.28%. 

Another inflation protection strategy used by many successful investors (like Warren Buffet) is putting capital into real estate infrastructure and real estate mutual fund establishments. That’s because infrastructure assets tend to preserve their value even in times of inflation.

2. Consider Bond Investments Like Treasury Inflation Protected Securities

Fixed income markets are heavily influenced by inflationary pressure. So, instead of investing in fixed income stocks, you can consider investing in bonds, which are usually less inflation-sensitive. Even though bond yields are much lower, this asset class can help investors diversify and balance their portfolios. 

Additionally, bonds like TIPS (Treasury Inflation Protected Securities) are inflation-proof since their principal increases as the inflation rate rises. 

While they are more expensive than ordinary bonds (because they offer inflation protection), they’re suitable if you’re looking for short to medium-term capital gains. TIPS are also a good option for investors who are nearing retirement age and want to avoid risking their savings. 

3. Make Tax-efficient Investments

Try to maximize tax efficiencies on all your investments. To do that, you can adopt different tax-efficient investing strategies like: 

• Putting assets that lose a smaller percentage of their returns to taxes in taxable accounts 
• Putting assets that lose a higher percentage to taxes in tax-advantaged accounts 

4. Put Your Excess Cash Into Stocks

Instead of holding onto your excess cash, you can invest it in company stocks or a stock mutual fund. This has proven to be a great way to protect yourself against rising inflation and help adjust it.

Why?

When you invest your money into company stocks or stocks mutual funds, businesses can pass along the increased company costs to consumers in the form of rising prices. In turn, this shields their profit margins from inflation, resulting in stable or even steadily increasing stock prices.

5. Look for Consumer Staples Stocks with Strong Pricing Power

Consumer staples, such as energy and food, have strong pricing power. That’s because they can easily offset any increased costs by implementing price increases without affecting demand.

As a result, the stocks of consumer staples companies are stable even during surging inflation. So, putting your money in commodity stocks is usually a safe bet during inflation.

6. Avoid Investing in Companies with High Labor Costs

During inflation, companies that are dependent on their workforce, such as healthcare and retail, try to raise wages to retain and attract employees. These raises aim to match the higher consumer good prices. However, the growing wages encourage even higher price increases, creating a spiraling inflation trend. 

Also, most experienced investors like Warren Buffet usually avoid investing in such companies since they require a huge capital influx to stay afloat in economic crises.

When choosing company stocks, make sure to screen the company and understand how dependent it is on its labor force. Aim to invest in companies that do not require a lot of capital to cover increasing labor costs in times of inflation.

7. Avoid Risky, High-growth Stocks

Rapid growth companies that are dependent on interest rates are at high risk during inflation. That’s because the Federal Reserve of the United States usually increases interest rates to discourage borrowing during higher inflation periods. 

In turn, emerging companies can be negatively affected by the higher interest rate.

If you’re looking for promising high-growth companies, ensure that their growth comes from stable operating leverage. Such companies are usually less affected by the surging inflation and the resulting interest rate hike and have stable stock prices.

8. Keep Track of Your Spending and Try to Save

The consumer price index surge indicates the increase in commodity prices. And these higher price trends decrease your purchasing power and lead to higher inflationary pressure. 

To avoid getting hit by the higher commodity prices, just start keeping track of all your expenses and try to:

• Find cheaper alternatives to some of the goods in your basket
• Do without some of the less essential things you buy on a regular basis
• Set a monthly budget and try to stay within it

9. Open a Savings Account

Opening a savings account is a good way to earn some interest on your money, even during higher inflation periods. Just open an account and put at least six months' worth of savings in it. 

Even though most traditional savings accounts do not offer very high rates, earning a modest interest rate is better than nothing.

Alternatively, you can try searching for online savings accounts since these sometimes offer a much higher interest rate than the average.

If you are looking for short-term savings, you can also deposit some money in a certificate of deposit.

10. Research Past Inflation Trends

Researching past high inflation trends can help you identify some current and future inflation patterns. Such patterns include:

• Stellar commodity stock performance
• Stability of the energy sector
• Good performance of real estate and other alternative asset classes

Now, to make things easier for you, we’ll help you start out with one of the best inflation-resistant alternative assets - fine wine!

Why You Should Consider Wine & How to Invest in it Through Vinovest

One of the best alternatives to invest in right now is fine wine. The fine wine Liv-ex index has grown by 10% in 2021 and is predicted to grow steadily in 2024. 

Additionally, unlike a decade ago, you do not need to be a high-net-worth individual or a wine expert to create a successful wine portfolio nowadays. With Vinovest, you can start your wine investment journey with just a few simple mouse clicks. 

Vinovest is a wine investment company that can help you buy, store, sell, and even deliver fine wine bottles from all over the world. We also offer personal wine portfolio management tailored to your investment preferences and risk tolerance.

Visit the website to know more!

So, what are you waiting for? 

Now is the time to invest in inflation-resistant alternatives like fine wine so you can get high returns later on.

Beat Inflation in 2023 by Diversifying Your Portfolio

The skyrocketing inflation trend in 2024 has changed the way we live and invest. To ensure you beat inflation in 2024, you need to adjust your portfolio and investment strategies to the changing economic environment and stock market trends.

A great way to protect yourself from the negative effects of current and future inflation trends is to start investing in alternatives like fine wine. So sign up on Vinovest today and start building a winning wine portfolio!