Suze Orman the only asset class that earns more than inflation


Personal finance expert loves stocks, even if there’s a bear market ahead

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With the Bank of Canada declaring our current inflation push to be “transient but not short-lived,” Canadians are bracing for another blow to their purchasing power in 2022.

But whether inflation comes out of hibernation or we’re headed for a bear market, personal finance expert Suze Orman says you should always rely on stocks for the long term.

“Over the long term, stocks have produced the best gains after controlling for inflation,” Orman wrote in a blog last year. “Bonds and cash are struggling to keep pace with inflation; only stocks have a reputation for winning more than inflation. “

Orman’s advice is sound. But some areas of the stock market perform better than others during times of high inflation.

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Whether you are looking to invest thousands of dollars or just your “coin” from your daily purchases, the following three areas could give you an extra boost in 2022.

1. Banks

In his blog post, Orman says investors should be prepared for stocks to go through periods when their value drops.

But it also offers the possibility of acquiring more high-end stocks at rock-bottom prices. When the next downturn occurs (and it will), there’s one place investors might want to turn first: the banks.

Unlike the vast majority of other sectors, banks do well when central banks tighten their policies. When interest rates rise, bank assets like bonds and loans tend to rise higher than their liabilities like deposits.

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Rising rates mean that banks can earn a larger spread between what they pay in interest on savings accounts and what they earn from loans.

Another great thing is that it’s like shooting a fish in a barrel. Just pick two or three of the biggest banks in the country, like Royal Bank of Canada, CIBC, or BMO, and you should have all the positive exposure you need to rising interest rates. You can also consider investing in big US banks like Bank of America or JPMorgan Chase, or foreign giants like HSBC, BNP Paribas or Barclays.

And at least one investing app will give you $ 50 to trade with, commission free, when you invest at least $ 150.

2. Insurance

Even when people cut their budgets to help offset rising prices, we know those car and life insurance premiums will continue to add up no matter what.

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Which means that while insurance may not be the most exciting industry, it is a defensive activity that can provide great portfolio protection, especially since insurers generally get better returns. on their “float” when rates rise.

And on top of that, insurers often pay dividends to their shareholders, which means you can count on a little extra cash a few times a year.

For those looking to invest in insurance, Manulife, Great-West Lifeco and Sun Life are the giants in Canada; Chubb, Allstate and MetLife are some of the big names in the United States

3. Precious metals

When it comes to investing in precious metals, these stock choices can be worth their weight in gold.

Gold and silver have long been viewed as safe havens, which means that when all else fails, their value doesn’t really tarnish.

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You can still buy bullion or precious metal coins, but mining stocks and ETFs allow you to invest in space at low cost and without needing to find storage.

Additionally, large, diversified mining companies like Rio Tinto and Freeport-McMoRan are also mining metals like copper, which is currently experiencing booming demand due to its role in the production of electric vehicles. Canada has many powerful mining companies, including Barrick Gold, Kinross Gold, and Teck Resources.

Historically, the best time to make money with metals is when inflation is about to continue to rise, such as at this time.

A more detailed inflationary hedge in 2022

To be sure, Orman’s advice overlooks several interesting inflation hedges outside of the stock market.

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For example, the fine arts.

Contemporary art has surpassed the S&P 500 by 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with very little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no connection, Citi found that the correlation between contemporary art and the S&P 500 was only 0.12 over the past 25 years.

Investing in art by Banksy and Andy Warhol was once an option only for the ultra-rich. But with a new investment platform, you can invest in iconic works of art like Jeff Bezos and Bill Gates do.

This article was created by Wise Publishing. Wise is dedicated to providing information that helps readers navigate the complex landscape of personal finance. Wise only associates with brands he trusts and believes may be of use to the reader. This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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Michael J. Birnbaum