Portfolio to deal with inflation

Some ways to protect your portfolio against high inflation.

1. Businesses that possess pricing power

These businesses can increase selling price thereby offsetting the effect of a higher discount rate (due to rate rise) that lowers valuation by producing higher free cash flows. Product with a scarcity effect, branded products with little to no substitution or monopoly businesses. Eg, Apple, Mcdonalds

2. Commodities

Resources stocks (mining and energy) have a positive correlation with real yields and are generally strong performing sectors into rising inflation.

3. Precious metals

Precious metals, especially gold tend to hold their value in real terms.

4. Invest in Inflation-linked bonds. Eg, Treasury Inflation-Protected Securities(TIPS)

5. Invest in real assets. Prime location property or REITs usually out beat the inflation rate in longer-term

6. Infrastructure assets that have monopolies and are essential to the community. Eg. utilities, toll roads, and airports.

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