Few people equate the word inflation with wealth. Most of the time, inflation garners feelings of frustration and anger. Higher prices and stagnant wages make it harder to get out of debt and save money for the future. But inflation may have an upside.
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In some instances, inflation may actually help the middle class get richer. Savvy investments and capitalizing on opportunities during periods of high inflation may aid people, even if they are not part of the top earners.
We asked financial experts nationwide to discuss ways the middle class can use inflation to build wealth. Here are four ideas to help you get richer during inflation.
Owning Stock
Many businesses thrive during periods of high inflation because they are able to charge more for goods and services. Purchasing stocks in these companies can help you capitalize on this phenomenon.
As Jordan Patrick, a certified financial planner (CFP)and senior financial advisor at Commas, explained, “Owning stocks is a great way to build wealth during periods of inflation.”
During inflationary times, some companies can raise prices without affecting consumer demand.
“Consider the staples in your home — you’re likely to still buy toothpaste and deodorant regardless of a small price increase,” he continued. “This ability to adjust prices can boost company revenues and profits, which can be passed along to shareholders through dividends or reinvested in projects that increase the stock price.”
Shmuel Shayowitz, president and chief lending officer at Approved Funding, agreed owning stocks can help you build wealth during inflation.
“Stocks often do well during inflation because companies can raise prices to cover higher costs,” said Shayowitz. “By investing in a mix of different stocks, you can potentially earn returns that beat inflation.
“Additionally, stocks that pay dividends can give you a growing income stream, helping to protect against rising expenses.”
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Investing in Real Estate
All of our experts agreed that investing in real estate is one of the best ways that middle class individuals can get richer during periods of inflation.
Drawing on his 25 years of experience in the industry, Shayowitz said, “By far, investing in real estate is the best tool and hedge against inflation.”
According to him, real estate usually increases in value over time, often growing faster than the rate of inflation. “When the middle class buys property with a fixed-rate mortgage, they can secure low monthly payments that remain constant while the value of their property continues to rise,” said Shayowitz.
Seamus Nally, the CEO of TurboTenant, also said that real estate was a smart way for the middle class to build wealth during inflation.
He explained, “Inflation causes real estate values to increase. While this may have downsides for middle class individuals in terms of buying and renting costs, it can also provide some opportunities.”
For example, middle class homeowners can sell their properties for a much higher value than prior to inflation, boosting their wealth.
Scott Lieberman, the founder of Touchdown Money, suggested people consider buying property to take advantage of these increases in prices.
“When inflation is high, the first thing governments usually do is raise interest rates,” he said. “That makes home prices higher, as we’ve seen in the past few years. Buying cheap land now can lock in your rates. If you buy a house, that’s even better: you can make passive income by renting it out.”
Investing in Metals
In addition to real estate, middle-class individuals can consider other investments, like heavy metals, to build wealth during inflation. In fact, there may be more stability in these items.
“Gold holds value better than just about any other asset,” said Lieberman. “It has intrinsic value, as opposed to being given value by the government, so it’s a sound investment.”
Diversifying Your Portfolio
Lieberman also recommended the middle class diversify their portfolios in order to keep their growing wealth from getting crushed by high inflation. And even when not experiencing high inflation, diversifying is always a good idea.
He said, “Spreading out your assets gives you the best chance to ride out the storm of inflation. Investing in bonds and raw materials along with the market can help.”
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This article originally appeared on GOBankingRates.com: 4 Ways the Middle Class Can Use Inflation To Build Wealth
