Monday, January 30, 2023

Investing in equities to combat inflation

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Investing in raw products produced at the front end of the supply chain is critical during periods of high inflation, in my opinion.

Have a look at this…

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This is because when we go to the supermarket to buy apples, for example…

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While it may not cost the farmer more money to grow apples (assuming he owns the land), the farmer (let’s call him Abe) would want to raise the price of his apples when selling them to the distributor (let’s call him Bob) who is responsible for getting the apples to the grocery store during times of inflation.

Because Bob paid significantly more for Abe’s apples than he did before, and because fuel prices have increased due to inflation, he will have to demand more money from the grocery store in exchange for the apples in order to maintain the same purchasing power he had before and “breakeven.”

This chain has more middlemen in the real world, but I only want to offer a simple picture of why prices rise and why it’s crucial to invest in raw materials or firms that produce raw materials at the front end of the supply chain.

This is why energy and commodities outperform the S&P 500 during inflationary periods…

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Look at this now…

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You can invest in stocks that produce particular commodities with supply limitations and rising demand, as these stocks tend to outperform the market.

Do you recall Abe the apple farmer? If you’re an accredited investor, you may use AcreTrader to invest in farmland… I’m not sure how you can get any closer to the supply chain’s front end than that!

See also  How to analyze stocks for long-term investment?

Take a look at farmland’s average annual return over the last 20 years…

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As a result, art is not only an uncorrelated asset class, but also a wonderful investment during periods of inflation…

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By the way, give this a thought…

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If I were you I’d…

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