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Issue16

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Published in: Business, Economy & Finance
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  • 1. Ross Naylor +48 (22) 389 65 70 (w) +48 512 275 706 (m) ul. Królewska 27 lok 411 Warszawa 00-060 PolandUp, Up And Away - Follow UpA number of you have contacted me as a r esult of last weeks inflation ezine (find it here if youdidnt receive it). You wanted to know if I had any ideas for investments that can profit in theevent of high inflation.Having given it some thought I have come up with 5 suggestions. They are listed below.I also came across a few articles on the subject of inflation, some of which were sent in byreaders (thank you, to those who did). I have included 3 of my favorites in this weeks issue.5 Inflation Defying Investments1. Index Linked Government Bonds. For example US Treasury Inflation Protected Securities(TIPS) or Index Linked Gilts in the UK.These are essentially an I.O.U. from the Government. In return for lending the Governmentmoney, it agrees to pay you annual interest, until such time as your money is returned to you at afixed future date.They offer a hedge against inflation because the interest payments and redemption value rise asinflation rises.2. High Dividend Stocks. Historically stocks have been another useful hedge as they have thecapacity to grow faster than inflation.
  • 2. As a rule, public companies either reinvest their earnings or pass them along to shareholders asdividends.For individuals looking for a hedge against inflation, the second variety is hard to beat. Thatsbecause dividend-rich stocks provide income, but unlike fixed-income investments they have thepotential for capital growth as well.3. Property. Property is a fixed asset and any kind of fixed asset becomes more valuable withtime thanks to asset inflation.4. Gold. OK, it doesnt have any yield. However, gold is typically viewed as a classic hedgeagainst inflation. As the World Gold Council, states: "Gold is not a perfect hedge against inflationbut it is the only hedge that has been tried and tested over centuries that have seen currenciesrise and fall."5. Commodities. Find the things that are rising in price the most - oil and foodstuffs/agriculturalproducts spring to mind. Look to add some exposure to them to your portfolio.Be careful though, commodities can be volatile and have risen a lot already. If they dont suit yourrisk profile, look at investing in a fund that tracks a basket of them but that at least provides someform of guarantee of your principal.Inflation articlesUK Inflation hits 3.7%. From the Guardian. Thats nearly twice the target rate (2%). Read it here.Britain triggers global inflation alarm. From the FT. Read it here.Inflation in China could be really heating up. Read it here.DisclaimerThe views expressed here are my own. They are not necessarily shared by AES International. They are subject tochange at any time based on market and other conditions.This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such.References to specific securities are for illustrative or informational purposes only and are not intended to be, andshould not be interpreted as, recommendations to purchase or sell such securities.My day job is as a qualified financial planner. This entails me giving my clients advice on maximizing the returnson their investments within their specified risk parameters. This may or may not involve me recommending some ofthe securities listed above.
  • 3. Call me: +48 (22) 389 65 70 (w) +48 512 275 706 (m)To disallow Ross Naylor from sending you email with this service, click here.

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