Inflation in the U.S. has reached levels not seen since the 1980s. That means that millennials have never seen inflation this high. Consequently, they are probably unaware of not only how devasting inflation can be, but also about the best ways to hedge against surging inflation. Simply stated, inflation ravages purchasing power, and the higher the inflation rate, the quicker purchasing power is destroyed. Even if you receive a cost of living (CoL) raise it is usually "too little too late" just like the FED's recent attempts to fight inflation. The reason a CoL raise doesn't help much is because it is a lagging entity. In other words, even if you get a raise equal to the actual level of … [Read more...]
How to Prepare for Inflation
With inflation reaching heights not seen in many years, people are wondering... How to prepare for inflation? And What effects will inflation have on our investments? Between 2020 and 2021, inflation steadily increased from a minuscule 0.12% in May of 2020 to just under 5.4% in June and July of 2021. Although 5+% may not seem like much, it means that prices are 5% higher than they were a year ago. If inflation stays at 5%, you might think it has stabilized, but unfortunately, inflation compounds. So if the inflation rate is still at 5%, next year's prices are now more than 10% higher than last year. So, for instance, after 1 year at 5% inflation, a $100 item now costs $105, but after another … [Read more...]
What are Derivatives and How do they Work?
Derivatives Defined According to Dictionary.com the term "derivative" means 1. derived. or 2. not original; secondary. In the financial arena derivatives are derived from a basic commodity and can be a portion of that original commodity. They are essentially contracts between two or more people. You can think of derivatives as ways of "slicing and dicing" financial contracts. For instance, a normal bond could be broken into two parts. The first part would be the underlying asset itself and any appreciation thereon. The second part could be all the interest due on that bond. This way one investor would get more leverage on the appreciation of the bond while the other investor would … [Read more...]
