Strategies for reducing the impact of long-term inflation on your investments

by Rhonda Chavez Payne, Wealth Manager, AAMS

Are you saving for retirement? For education? If so, you’ll want to know how inflation can impact your savings. Inflation rates have fluctuated over the years; short-term changes aren’t often noticed. The real issue is the effect of long-term inflation.

Over the long term, inflation erodes the purchasing power of your income and wealth. Even as you save and invest, your accumulated wealth buys less and less, just with the mere passage of time. And those who put off saving and investing are impacted even more.

The effects of inflation can’t be denied, yet there are ways to fight them. You should own at least some investments whose potential return exceeds the inflation rate. A portfolio that earns 2% when inflation is 3% actually loses purchasing power each year. Though past performance is no guarantee of future results, stocks historically have provided higher long-term total returns than cash alternatives or bonds. However, that potential for higher returns comes with greater risk of volatility and potential for loss, so stock investments may not be appropriate for money you count on to be available in the short term. You’ll want to think about whether you have the financial and emotional ability to ride out the ups and downs of a stock’s price before investing.

Bonds can also help. One idea is Treasury Inflation-Protected Securities (TIPS), which are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. The principal of a TIPS bond is automatically adjusted every six months to reflect changes in the Consumer Price Index; as long as you hold a TIPS to maturity, you can receive the greater principal (original or inflation-adjusted). As with all bonds, the interest income is taxable unless you own them in a tax-deferred account such as an IRA.

These are just a few of the many ways to seek returns to outpace inflation. Call Stratos Wealth Partners’ office to schedule an appointment and explore what strategies are appropriate for you.  Stratos Wealth Partners are professionals with decades of experience in providing strategies for wealth accumulation and tax management.

Contact Stratos Wealth Partners by phone at 928.460.5507, visit, or stop by the Old Santa Fe Train Depot, 100 E. Sheldon Street, Suite 105, in Prescott.

Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Stratos Wealth Partners, Ltd., a registered investment advisor and a separate entity from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

All investing involves risk, including the potential loss of principal, and there is no guarantee that any investment will be worth what you paid for it when you sell.