Inflation is being kept in check right now. But you can guarantee that it will rear its ugly head at some point in the future. Too much money is being printed by the government. And eventually all those dollars floating around in the economy will be chasing a supply of goods that simply isn’t large enough.
So how do you invest for inflation that isn’t here yet?
First, you want to wait until you see the Consumer Price Index and the Producer Price Index creeping up. Don’t wait until everybody is worried about it. You want to take action when the numbers start increasing slightly.
At that point, diversify your portfolio with a balance of investment vehicles: bonds, precious metals, and stocks. How much do you allocate to each one? That is really up to you. But you should consider such factors as your age, your comfort level with risk, and how many years you have until you retire.
I will probably leave approximately 50 percent of my own portfolio in equities (diversified among various markets and sectors), and put approximately 25 percent in bonds and 25 percent in precious metals. And I’m talking, here, about the 80 percent of my portfolio that I view as long-term. The 20 percent that I trade on a short-term basis changes from day to day.[Ed. Note: Rick Pendergraft’s take on the market and approach for investing with confidence despite the Great Recession is available every day in ETR’s sister publication, Investor’s Daily Edge. Sign up for FREE right here.]