May 18, 2022
3 Ways to Get Your Investments Working Harder During Inflation
By now, we’ve all noticed having to dig deeper into our pockets to buy groceries, fill up gas tanks, and book vacations. We are witnessing and experiencing significant inflation for the first time in decades. Over the past 6 months, inflation has spiked to levels not seen since the 1980’s, with the most recent Consumer Price Index (CPI) in Canada rising 6.7% year over year. During inflationary times, it is even more important to make sure that your investments are working for you effectively to maintain purchasing power. Here are some suggestions you can consider for your investment portfolios:
1) Floating Rate Notes – Floating Rate Notes (FRNs) are a type of fixed-income security that pay a “floating” rate of interest rather than a fixed rate of interest. The amount of the interest payment is based on a “reference rate.” If that reference rate is higher on the date of interest payment, the interest paid will increase and vice versa. FRNs are useful for investors to consider when it is expected that interest rates will increase.
2) Dividend Growth Stocks – Investing in solid companies that have pricing power and the ability to grow dividends are a great way to keep up with inflation. While stock prices can be volatile in the short term, a rising dividend stream can help maintain purchasing power over the long term.
3) Alternative Assets – These investments, heavily utilized by pension funds, are a good inflation hedge. These assets include things like real estate, commodities, and infrastructure. Many investments in these areas are structured with revenue streams that are either linked to inflation or are essential services where price increases can be passed on to consumers with relative ease.
Northfront Financial is a leader in providing individual investors with access to alternative investments. This approach has been highly successful during volatile periods in equity markets as we have seen so far in 2022. If you would like to learn more about making your money work harder using alternative investments, contact Northfront today.
About Northfront Financial
Northfront Financial, based in Calgary, Alberta is a boutique full-service financial planning firm serving professionals and business owners. We pride ourselves on being a different kind of investment firm. This stems from our humble roots, entrepreneurial spirit, and a culture of integrity and professionalism. Our goal is to offer the best investment products, services, advice, and ideas the financial industry has to offer from our experienced team, which includes individuals with the Chartered Financial Analyst® (CFA®), Chartered Investment Manager (CIM®), and Certified Financial Planner™ (CFP™) designations.