Most economists agree that increased consumer prices are coming, although nobody can tell precisely when this will happen. If you live on a fixed income, as it is the case of most pensioners, you should view inflation as a cause of a serious concern.
Let your financial and
philosophical sharpness grow together
When the media mention that a loss of
purchasing power might take place within months, danger is already
looming in the horizon. If you do nothing, inflation will catch you
unprepared. If you take appropriate measures, that will not be the end
of the story either. As soon as inflation is under control, the next
problem will come to haunt us, possibly another stock market crash.
if you occupy a position of influence, your possibilities of changing
society remain minuscule for the simple reason that millions of people
out there don't care about what you think and never will. Major changes
in History ultimately result from ideas held in high regard, rightly or
wrongly, by significant segments of the population. Those beliefs evolve
through generations and change very slowly, even in the era of the
internet and the global economy.
As an investor, you will be much
better off if you realize your impotence to bring fundamental changes
to society and stop worrying about it. An effective strategy to help
other people, which is by all means a laudable intent, is to focus your
efforts on a restricted field where your contribution can really make a
Give up unrealistic expectations and concentrate on what's
Adopting a rational investment philosophy involves
giving up unrealistic expectations and concentrating on what is
feasible. You cannot prevent inflation or deflation from taking place,
but if you play your cards well, you can make money from them. Instead
of worrying about the disadvantages of rising or falling prices, why
don't you figure out how to use each financial phenomenon for your
Achieving a positive result in your bank account
will allow you to devote your gains to helping others, if that is your
wish. For each disruptive event, there is an investment strategy that
can help you make a profit. Rising share prices represent the easiest
situation to deal with because most people can figure out that there is
plenty of money to be made if you borrow at 6% interest and invest at
What makes rational investment difficult is our
psychological resistance to letting go of worry, recognizing past
mistakes, and taking practical action. In addition, a wise man must
accept that an investment method that proves successful in one
environment frequently becomes unsuitable when the context changes.
estate and gold coins may be great investments during inflationary
periods, but tend to be lousy places for your money when the curve turns
and prices begin to fall. You certainly don't want to be caught with a
huge mortgage at a fixed rate of 8% when the price of residential
properties has fallen by 20% and you can borrow money at 3%.
is up to you in each case to take sensible measures to profit from the
situation or, at least, to minimize its negative consequences. As
individuals, our best strategy consists of letting go of anxiety and
viewing inflation, deflation, or unemployment just as problems to be
Exaggerated concerns seldom improve anything
From this perspective, those phenomena are similar to
the influenza virus that marks the arrival of winter every year.
Exaggerated concerns seldom improve anything. Instead, individuals
should identify the path that minimizes trouble and, if possible, allows
to profit from it.
Whenever you hear that inflation or deflation
are coming, ask yourself how you can structure your finances in order
to benefit from the situation. Can you link your income to a product
whose price is likely to increase or decrease at the same pace as the
overall economy? Can you reduce the amount of cash that you require to
live and invest the remainder in assets that will profit from upcoming
Economists speculate all the time about next
year's rates of unemployment, inflation or deflation. For your personal
investment decisions, you don't need to wait until the exact figure is
known. On most occasions, knowing the general trend is enough to make
rational investment choices.
If newspapers are discussing whether
next year's inflation is going to be 6% or 7%, that tells you as much
as you need to know. Take swift action and reflect about how to
structure your finances to deal with such price increases. Worrying is
essentially a waste of time. Although you cannot reshape the world
according to your taste, nothing prevents you from taking measures to
Discard anxiety and learn to face problems in the
best possible way: become a rational investor. Your financial and
philosophical sharpness will grow together. Your personal effectiveness
will increase and you will become more tolerant and self-reliant.
worrying and start taking action
Never place all your
savings on a single investment. If you acquire the habit of diversifying
your investments amongst different types of assets, chances are that
you will be much less troubled. If you purchase shares of solid
companies around the world, your portfolio will tend to be less affected
by problems in specific countries.
Learning to deal with the
world's problems is a better approach than being paralysed by them.
Wisdom is the process of learning what a man can achieve and what he
should rather let go of. Becoming a rational investor will make you a
better human being and help you overcome whatever financial fears the
day may bring.
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