Dealing with inflation and continuing to grow portfolio values in the personal finance space are vital for the coming year, say the region’s wealth management experts.
On one hand, clients have seen their portfolio values spike in recent months, said Jason Ayers, investment advisor at Stock Yards Bank & Trust, and now their decision is how best to use those assets.
“Clients have been amazed to see the value of their portfolio over the past few months as the market and their portfolio hit all-time highs,” he said. Conversations have focused on how their financial goals may have changed, with some clients looking to change their current lifestyle by using more assets from their portfolio while other clients are protecting their recent profits or looking for opportunities to keep growing their wealth for future generations. “
However, concerns about inflation leave some investors wondering what they can do to mitigate its effects.
“One of the best ways to protect yourself from inflation is to maximize sources of income that are tied to inflation, such as social security and pension payments,” Ayers said. “Responsible investing is a great way to fight rising inflation … Bonds are valued to exceed inflation expectations over the bond’s investment horizon, so bonds are used to meet medium-term spending needs. Stocks are a good hedge against long-term inflation fears, as companies can raise the prices of goods and services, which helps maintain the purchasing power of your portfolio over the long term. “
And it will remain an issue in the coming year.
“Inflation will remain a headline risk in 2022, and with it interest rates, if the Federal Reserve shuts down its bond-buying program,” he said. “COVID has forced companies to think more strategically as more employees continue to work remotely and office buildings close their doors. With over 10 million vacancies, companies will continue to rely on automation and new technologies such as artificial intelligence and machine learning to optimize their operations. “
Infrastructure accounting can offer investment opportunities
Ayers said changes in the country due to the passage of the Infrastructure Investment and Jobs Bill could create some opportunities for prosperity growth.
“At the level of individual safety, we invest in strong companies that take pride in looking after their employees, giving back to their communities and taking good care of the environment. We think this philosophy fits in well with the goals of the Infrastructure Act, ”he said. “The Infrastructure Act, along with other considerations, is likely to continue the trend of relocating manufacturing facilities to the United States. We are interested in companies that are likely to benefit from this trend to bring production back to the US, be it equipment for building new plants, optimizing warehouses for more efficient operation, or providing improved forms of communication and transportation. “
But Steve Grossman of Robert W. Baird & Co. Incorporated said it is the returns a company can offer, not politics, that should drive investment strategy.
“We want to own great companies that deliver above-average returns across business cycles,” he said. “We don’t let the political landscape determine our long-term investment approach.”
About millennials, cryptocurrency and other trends
Grossman also said it helps to have trained professionals in building your financial portfolio. According to a recent New York Times article, this is a trend some millennials are bucking when they turn to cryptocurrency and online trading through apps like Robinhood instead of financial advisors.
“As in any area, someone who is not actively involved in that area falls into the category of not knowing what they do not know,” said Grossman. “Comprehensive financial planning and investment management require extensive education, resources, and access to research and data that most people do not have.”
In particular, Grossman said his company couldn’t recommend investing in cryptocurrency.
“It is a commodity and does not correspond to the parameters of a currency and is not a permanent medium of exchange,” he said.
“Cryptocurrency has certainly found a place in the investment world, with asset class performance drawing a lot of attention,” he said. “At Stock Yards Bank & Trust, our goal is to preserve what our clients have worked hard for and to deliver competitive returns over the long term without unnecessary risk. We cannot confidently look anyone in the eye and say that cryptocurrency does not pose a significant and unnecessary risk to their retirement account or investment portfolio. “
He believes it will pay off to start working now with stable investments to expand your financial portfolio. in the long run.
“Working with a professional who can lead you where you want to be 10, 20, and 30 years from now is very different than betting on a name that made headlines this morning,” he said. “Protecting clients and their portfolios from volatility is one of the most important benefits of working with professional financial planners and advisors.”