What are Buffett’s investment tips during rising inflation?

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What are Buffett’s investment tips during rising inflation?

 What are Buffett’s investment tips during rising inflation?
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Highlights

  • The inflation rate of the UK surged unexpectedly to 5.4% in December up from November’s 5.1%.
  • Ace investor Warren Buffett once said sound businesses during inflation are those, where you invest once and don’t have to invest in again.

US ace investor, business magnate and philanthropist Warren Buffett, famously known as Oracle of Omaha, once said sound businesses during inflation are those, where you invest once and don’t have to invest in again. 

The inflation rate in the UK surged unexpectedly to 5.4% in December up from November’s 5.1%, enhancing pressure on the household sector and on the Bank of England to raise interest rate again.

Why are investors concerned about rising inflation? The rising prices affect the purchasing power in a negative way, and investments, which may give a positive return, can turn negative due to high inflation.    

Here are the five tips by Buffett to help you to overcome rising inflation.

The inflation rate in the UK surged unexpectedly to 5.4% in December

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  1. Increase your earning source

 When the prices are rising, the best way to cope is to look for different sources of earnings. You may invest your free time in developing your skills to position yourself for a higher paycheck. You can also use your skills to start a freelance side hustle or consider switching your job with a higher salary and more opportunities.

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  1. Invest in stock market

Investing in the stock market has the potential to outperform increasing inflation, which makes it one of the strongest hedges against Inflation. You may consider inflation as an opportunity by investing in the value stocks that may benefit from the rising prices such as energy, food, technology, and building materials.

Buffett said that be fearful when others are greedy and be greedy when others are fearful. Look for the companies that can raise their prices during high inflation as it is able to offset their own increasing costs.

Investing in the stock market has the potential to outperform increasing inflation

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  1. Invest in precious metals

Precious metals such as gold and silver are widely used as a hedge during difficult economic conditions and higher inflation. Over the past five years, the value of gold surged by 52% and silver by 49%.  You can invest in this precious metal directly by purchasing its physical form or you can invest in gold stocks.

Also Read: 5 key personal finance tips for 2022

  1. Cut your costs

If you have taken any debts, a mortgage refi or rate swap isn’t suitable in high inflation. There are various options to reduce the interest. One of them is slashing the cost of debt to take out a lower-interest debt consolidation loan. Also, cutting unnecessary expenses is another hedge against inflation.

  1. Be wary of loans with adjustable rates

The central bank usually raises interest rates to tackle the rising inflation. If you are carrying any adjustable-rate loan, rising inflation will raise your interest charges. In such cases, talk to your lender about refinancing and opting for fixed-rate debt.

Also Read: Should you invest in gold stocks with rising inflation?

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