Ed Butowsky, managing director at Chapwood Capital Investment Management LLC, joins Gerri Willis on Fox Business’ Covering Your Assets to discuss how investors can inflation-proof their portfolios amidst rising inflation around the corner.
I discussed how inflation is a very misquoted number. On average, a consumer experiences inflation that is about 5.5% higher than what the Consumer Price Index (CPI) reports. The government has made multiple changes in the way inflation is calculated over the past 30 years. Not surprisingly, each change in methodology has had the effect of lowering inflation rates. Unfortunately, every year the cost of living continues to rise for consumers. This factor is unquestionably the largest problem investors will encounter while planning for and entering retirement.
Maintaining and growing purchasing power is the foremost goal for investors. To merely hold the same level of purchasing power from your investments, your portfolio must return at least 7-8% every year. What does this mean? When you invest in government bonds, money market, and CDs, you are continuously losing purchasing power once inflation and taxes have been subtracted. If you were to roll 6-month CDs since 1970, after tax and government inflation you would have lost on average 2.1% purchasing power per year.
To inflation-proof your portfolio, you should incorporate low-correlating equities and commodities, which will undoubtedly appreciate over time. Diamonds for example have not appreciated as much as gold and silver, but are a safe vehicle that will continue to increase in value.
Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.
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