There is no bad investment timing, only bad strategies. Knowing your options is vital to good stagflation investment strategies that not only protect your savings but grow them.

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As recession looms on the horizon, it is natural to worry about how much more you will have to spend on necessities. However, when this is mix in the trend of inflation, a condition known as stagflation, you face the value of your assets and purchasing power going down even as prices rise. Faced with these prospects, it is only natural to wonder if there is a way that you can fight the devaluation of your assets or even capitalize on investments during this time period.

There are several strategies for keeping the value of your assets from depreciating during stagflation, including buying real estate, commodities trading, buying value stocks, and investment in gold and other precious metals. These stagflation investing strategies each carry their own advantages and disadvantages, but they offer the best prospects for maintaining your financial portfolio's value and increasing it throughout the recession.

In this article, we will discuss what stagflation is and what it does to the value of your retirement portfolio. We will also offer you solutions on how to beat stagflation and offer our recommendations as to your best options in investments for stagflation.

What Is Stagflation?

Simply put, stagflation is the condition of high inflation during a recession or depression. During this time, unemployment rises, income levels go down, and consumer demand declines, all while the purchasing power of those in the workforce slowly decreases. The longer that stagflation persists, the more it can impact your financial portfolio.

Stagflation is not supposed to be a common condition, and at one point in history, it was thought to be impossible. In fact, prior to the great depression, economic downturns and inflation occurred separately. However, in the early 1970s, inflation hit double digits and unemployment reached a high of 9% in the midst of recession, which is now the standard that we mark stagflation by.

But in fact, stagflation in the United States has been a regular occurrence since the Great Depression, even if its effects have not been as pronounced as they were in the 70s. Many economists have redefined the idea of some inflation to be a normal condition regardless of economic performance, which isolates the significant periods of stagflation.

Whether or not you subscribe to the idea of inflation as a regular part of modern finance, it is notable that many financial experts believe that a period of stagflation is looming ahead. Earlier this year, Forbes Magazine noted, "As of June 2022, the United States is not in stagflation, nor is most of the world, but it's likely coming… stagflation will show early signs late in 2022 and get roaring in 2023."

There are several theories as to why stagflation occurs, but no consensus. However, one thing agreed upon is that fighting it is difficult since treating one part of the issue tends to make the other parts worse. But while governments pull on economic levers to fix the issue, we are all left to feel the effects on our finances.

What are Stagflation's Effects on My Investment Portfolio?

Every well-diversified portfolio has investments in many areas in order to mitigate risk. However, depending on the mix of those investments, stagflation reaches across the spectrum of financial instruments and devalues them simultaneously.

While financial strategies vary, stocks, bonds, and cash (or cash equivalents) make up the majority of many portfolios. However, during a period of stagflation, companies pull back from growth, and the promise of the purchasing power of bonds declines. Cash and equivalent investments likewise lose purchasing power as consumer prices rise.

If you have an IRA or 401(k), you are likewise at risk of losing out. Since the recession is affecting investments that your retirement accounts are likely involved with, the overall value will go down, leaving your retirement account in a weak position.

In short, in the face of stagflation, traditional investment strategies are likely to be counterproductive during a period of stagflation. In order to prevent the loss of asset value, the mix in your financial portfolio must be reconsidered. This means reorienting your portfolio for stagflation investing.

What Should I Consider as Part of My Stagflation Investing Strategy?

It is best to talk to a financial advisor to ensure that you make the best choices for your investment strategies. You can redistribute your assets into a few standard areas that are not as prone to stagflation to maintain your portfolio's value.

It is also important to remember that the period of stagflation will not last forever, and that your investments should take into account the long term as well as the short term.

4 Best Investments for Stagflation:

#4 Value stocks

Value stocks are a way to hedge for when the market rebounds. Stocks that are currently on the market for bargain prices may pay off in a big way when the recession is over.

However, value stocks carry the same risks as any other stock; you are speculating on future success. In addition, what looks to be an undervalued stock may turn out to be a stock's actual value and net you nothing. As a stagflation investing strategy, this one carries the most risk.

#3 Real Estate

Regardless of the economy, people still require housing. Real estate value tends to move with inflation, and mortgage rates and home prices are sometimes lower during a recession, making them easier to buy. Home values have the potential to increase in the future, and you will not have as much competition from potential home buyers since purchasing power for many individuals will be focused on buying essentials.

Despite this, real estate carries risks in that it is time intensive and subject to taxation, transaction fees, and upkeep. Income from real estate is also not guaranteed and may be impacted by local rent control laws.

#2 Commodities

Commodities tend not to follow the trend that stocks do during a recession and thus are a way to avoid the effects that you may experience with normal market conditions. Commodities tend to perform well during recessions as well. Commodities can be volatile, though, and while they make for an excellent area to shift some of your assets into, they should not be viewed as a panacea to the recession and must be managed carefully.

#1 Gold & Other Precious Metals

While traditionally recommended as a small part of your portfolio, gold and other precious metals can play a more significant part in your investing for stagflation strategy.

The rest of this article will focus on investments in precious metals (in particular, gold) and their vital role in your retirement portfolio.

Why is Gold the Most Recommended Option in Investing for Stagflation?

Gold is frequently mentioned as the best choice for smart stagflation investing. While its value is sometimes overinflated, there is some truth to the hype. The value of gold and other precious metals tends to remain stable in the face of most other financial uncertainty.

Gold, for example, has trended upward over the last decade, and is expected to continue to climb. Gold's value is more than a shiny metal that stands in as a symbol of wealth – it has many valuable uses in industry.

This is also true of the other precious metals typically considered alongside gold, such as silver, platinum, and palladium. In this respect, they offer some of the advantages of commodities without attendant volatility.

However, there is an even better reason to invest in gold and other precious metals during stagflation. While every recession is different, precious metals, especially gold and palladium, tend to do particularly well when the dollar is weak.

During 1980, when inflation reached its peak, gold hit a high of almost $700 per ounce, up from around $200 per ounce the previous year. When inflation went back down, the value of gold also went down, but to an average of $400 per ounce.

Precious metals are not exactly liquid, so the ability to profit during the short term may be limited. However, even if that gold is not able to be sold at a peak high, it is still a clear winner in the long term. That is why, alongside of the direct purchase of gold, you may also want to consider rolling over your IRAs/401(k) into a Gold IRA.

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What is a Gold IRA?

Like traditional IRAs, a Gold IRA is a type of retirement account that offers you tax advantages while managing your investment assets for the future. Where a Gold IRA differs from a traditional IRA is that the investments are in gold and other precious metals rather than stocks or mutual funds.

Gold IRAs are so-called because of the precious metal that it focuses on (gold); however, certain brokers will also trade in silver, platinum, and palladium. These metals are usually in bullion, but many brokers also deal in coins.

Because of the nature of Gold IRAs, you must set up an account with companies specifically geared to dealing with handling precious metals. These companies will assist you with the storage of your assets since, by law, the precious metals in a Gold IRA account must be stored at IRS-approved facilities. These accounts are also self-directed, which means that you will be more involved with the purchasing and selling of your assets.

To fund your Gold IRA, many investment firms will allow you to roll over your assets from a traditional IRA account or a 401(k). This will be particularly beneficial if you are worried about your current retirement account losing value due to stagflation.

See Also: What is a Gold IRA & 2 Best Gold IRA Companies Reviewed (Nasdaq)

Buyer Beware - Most common Gold IRA dealer lies

Is it Better to Invest Directly in Gold or to Open a Gold IRA?

Both direct investment in gold and other precious metals and opening up a Gold IRA should have a place in your financial portfolio. Each tactic has its own advantages and disadvantages that you should consider.

Pros and Cons to Directly Buying Precious Metals

One of the most immediate advantages of purchasing gold and other precious metals is that you have direct control over it. While you will have to figure out storage yourself (which can be a potential drawback), you have immediate access to the financial benefits when you sell it.

Direct purchase also gives you more options in how you handle purchasing and selling. Gold IRA companies typically limit themselves in the types of metals they are willing to deal with and the forms that they come in. This is especially true with dealing with coins, which can have more value than the metal they are minted with depending on the collector.

That said, you will have to pay taxes more or less immediately when you sell your assets since you are realizing a capital gain. This limits what you may gain from the sale, forcing you to wait for it to appreciate in value enough to make a sale make sense.

In addition, direct purchase means that you will have to find your own buyers and sellers. Precious metals are not liquid assets, so converting your precious metals to cash may take some time. There is also no guarantee that a collector will value what you have at the price point you want.

See Also:

Learn the 15 Bad Reasons to Buy Gold

Discover the top 10 Gold Dealer Lies

Pros and Cons to Gold IRAs

The lack of liquidity and tax disadvantages detracting from buying precious metals directly works very well for gold bought and sold under a Gold IRA. As with traditional IRAs, taxes are deferred until you are getting ready to realize your gains, presumably when you are getting ready to retire. And any income placed into the account is not counted against you when it comes time to pay taxes at the end of the year.

The downside to a Gold IRA is that there is a lot of paperwork involved, in addition to fees that aren't normally associated with IRAs. While the amount of paperwork can be cut down by a competent Gold IRA investment company, you won't be able to get away from those fees.

Gold IRAs will also not gain you any dividends or earnings unlike in a traditional IRA. Gold IRAs also offer slightly less flexibility than purchasing gold or other precious metals directly, thought they provide more structure.

--> Click here to download the guide for most common Gold IRA Scams (Buyer Beware)

Are There Any Other Considerations When Investing in Gold?

While the value of gold and other precious metals does particularly well during stagflation, it will not appreciate quickly under normal conditions. However, this may not be a significant concern if you are planning to leave that gold over the long term.

You can also take an integrated approach to gold investment – having a Gold IRA does not preclude you from purchasing gold or precious metals directly, and vice versa. In fact, some Gold IRA investment companies can act as brokers that you can engage with to buy and sell coins and bullion.

Another consideration is the size of your investment into gold or Gold IRAs. Typically, gold and precious metals or Gold IRAs are recommended to be between 5% to 10% of your portfolio. While you may consider allocating a larger portion for stagflation investing, you should be cautious not to overextend your finances.

On the other hand, you should also consider conditions outside of stagflation and how they will affect gold prices. There are still lingering effects of COVID-19, high energy prices, and the war in Ukraine. These types of world events continue to bring uncertainty into our lives, and as a result may keep the value of gold high for some time.

Finally, we talk a lot about gold in this article because it is a precious metal with proven performance. While precious metals in general tend to be solid conservative investments, they do not all function in the same way. When investing in precious metals of any kind, you should do your research and plan accordingly.

Should I Invest in Gold During Stagflation?

Ultimately, diversification into gold and other precious metals is the best option for investments for stagflation, and why we are recommended to investors to look into it now. Regardless of what your investment strategy looks like, direct purchase of gold and precious metals or investments into a Gold IRA should be an integral part of it.

So if you want to know how to beat stagflation, there are several options available to you, such as commodities, real estate, and value stock investing. However, the best option for stagflation investing is gold. If you are thinking of preparing your retirement profile to weather the effects of stagflation, consult with a financial consultant today.

Join a Free Gold & Silver Web Conference hosted by Augusta Precious Metals (Industry "Best Overall Gold IRA Company in 2022" by Money Magazine)

Attended by 1000s of Americans, this web conference will teach you how to diversify your savings to hedge against stagflation in today's volatile economy.

Click here to sign up >

Or, Download the guide for most common gold IRA scams to avoid.

FAQ

What happens during a stagflation?

During stagflation there is higher unemployment and the value of currency drops (hallmarks of a recession or depression) all while consumer prices continue to climb (inflation). More simply put, this means that your income level is likely to be lower, what money you do have has less value than normal, and that the prices of everything is higher.

Is stagflation worse than recession?

Yes. While some inflation is considered ‘normal' even during a recession, stagflation is marked by higher-than-normal inflation, which exacerbates the pain consumers feel. Worse, solutions will typically address only one aspect of the economy at the expense of the others – it is a very difficult thing to fight.

Is America in stagflation?

That depends on who you ask. The question of rests largely on technicalities, but while experts disagree on whether the United States is in stagflation at this moment, many acknowledge that the preconditions are there.

How do you get out of stagflation?

There is no easy solution to stagflation. Overall productivity in the economy needs to go up while inflation needs to go down, but how to accomplish this is not clear. That said, stagflation usually runs its course between a year to two years, though its effects may linger.

Is it good to buy a house during stagflation?

Unfortunately, there is no one size fits all to this question – you need to consider your own circumstances. Stagflation is sometimes good for buying a home because of lower housing prices and mortgage rates. However, your purchasing power may be limited, and your ability to pay on mortgages or emergency expenses for household repairs may be impacted.

What made money during stagflation?

Gold. This is why we recommend it as the number one stagflation investing option.

Who will suffer most from stagflation?

Generally speaking, families with low or fixed incomes since they will have to allocate their limited funds towards essentials. Retirement savers with traditional will also suffer from stagflation, since IRAs and 401(k)s will likely lose value due to downturn in the market value of stocks and bonds.

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Disclaimer: The information provided on this page is for educational purposes only and is not intended as investment advice. Refer to a professional for investment advice.

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info@goldforprotection.com

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