Beat Inflation with Smart Investing

Let’s talk about something that’s affecting all of us: inflation. Prices keep climbing, and it feels like our money doesn’t stretch as far as it used to. But there’s a way to fight back and even come out ahead. Let’s dive into how investing can help you grow your wealth and beat inflation.

What's Inflation and Why should you Care?

Inflation is when the general prices of goods and services go up over time. This means that the same amount of money buys you less than it did before. For example, if a cup of bubble tea cost $5 last year and now it’s $6, that’s inflation at work. It’s a sneaky thief, slowly eroding your purchasing power.

Imagine you have $100 tucked away in a regular savings account with a low-interest rate. If inflation is at 3% per year, in a year, your $100 will only have the buying power of about $97. That might not sound like much, but over time, this loss adds up. To keep your money’s value from shrinking, you need to make it grow faster than inflation.

If you’ve built your emergency fund, managed high-interest debts, and are looking for ways to grow your savings, investing is a smart next step. By diversifying into assets like stocks, bonds, or real estate, you can potentially grow your wealth over time and stay ahead of inflation. Investments offer opportunities that traditional savings accounts alone may not provide, however, all investments carry some level of risks and it’s important to do your research, understand your risk appetite before investing.

Different Ways to Invest

Once your finances are stable, exploring different investment options can help grow your wealth. Here are some ways to consider:

• Stocks allow you to own a portion of a company and, while they can be volatile, they have the potential to provide strong returns.
• Bonds, which involve lending money to companies or governments in exchange for interest payments, are generally more stable but offer lower returns.
• Real Estate Investment Trusts (REITS) can also be a valuable investment, where you can invest in income-generating properties, that has the potential to give you regular dividends and capital gains.
• Exchange-Traded Funds (ETFs) offers a diversified way to invest in multiple assets with lower risk and simplified management.
• Unit Trust is made up of money polled from multiple investors and invested in a variety of assets to meet an investment objective.

Diversify your Portfolio

A well-diversified portfolio helps manage risk and improve long-term financial stability. Diversification simply means not putting all your eggs (i.e. your investments) into one basket, instead spreading them across different assets, industries, geography and currency. For example, instead of investing $100k solely in Singapore Airlines (SIA) stock, you could invest in a unit trust that includes multiple airline stocks like SIA, Cathay Pacific, KLM and Delta. Overall, reducing the impact if one company underperforms.

Similarly, asset allocation refers to how your divide your money across different types of investments based on your risk tolerance and goals. Here’s how two different portfolios might look:

• Risk-Averse: 70% bond, 30% cash and others
• Aggressive growth: 80% stocks, 20% bond, cash and others

Striking the right balance helps you navigate market’s fluctuations while working towards your financial goals. SC Invest portfolios are guided by our investment professionals who take care of the ‘what’, ‘where’, ‘when’ and ‘how’ of investing for you.

Be an Informed Investor

Becoming an informed investor is essential because investing always carries risks. Before committing to any investment, ensure that you understand what you’re getting into and avoid following hype. With the rise of financial influencers on social media, it’s important to be do your research – take the time to investigate their backgrounds, credentials and fact-check what they’re saying. As the saying goes, “Think before you follow, wise money tomorrow”.

By staying informed and diversifying wisely, you can build a resilient portfolio that grows over time. The key is to start early and continue learning along the way!