Inflation on Investing In the Stock Market
Inflation on Investing In the Stock Market
Inflation is not a new thing in our world of development. This is a situation that has developed positive and negative impacts in the economy. Evidence shows that understanding inflation on investment is something that develops difficulties to most people. Although the government and investors are working towards economic growth, study and predictions show that the future of the economy will be affected by the current increase in inflation. Bill Gross is one among few economic analysts, and he argues that the inflation rate will increase and affect the future of the economy. Peter Schiff also believes that inflation will probably increase in the near future and develop stock market investment problems, (Amadeo, 2010).
Inflation is a growing concern in the economy. Although there exists the possibility of increase in the inflation rate, this is good news to my investment decision. I believe with the current prediction of increase in the inflation rate I will invest in the stock market by buying shares from different companies. At a high inflation rate, the ideal investment decision is to invest in the stock market simply because share prices will experience slight impacts as compared to investment in other places.
It is a common knowledge that with higher inflation interest rates will increase. If I buy shares in the current times, it means that I will get higher interest rates in the future when the inflation will be higher. Investing in the stock market is the best decision as compared to investing in other investment options, (Hellerstein, 1997).
Another reason why I will invest in the stock market is because of the government bonds. Evidence shows that the government plays a vital role when the economy experiences a high inflation rate. In this case, when the inflation will increase the adjusted securities will respond to the needs of investors who made their investment on government bonds. In my investment decision, I will consider buying government bonds simply because of their flexibility when inflation rate will shoot. Some government bonds favor individuals who invested in the stock market when the inflation rate increases.
They just adjust their rate in favor of investors to equate the inflation rate at that given time. The ‘I bond offers the best stock market investment option for an economy that is expected to experience inflation rate in the near future. The ‘I bond helps the investor solve the issue of inflation because it develops a certain rate of interest for the investors, (Stokes, 2012).
I believe investing in the stock market will help me survive in the economy given that the inflation rate will increase as predicted. Adjusted securities help investor’s invest in something that will help them in different ways respond to the inflation challenges. This option will help me stay ahead of inflation thus it will be a decision worth making unlike investing in other investments that are not certain whether incase of inflation they will allow survival in the economy. Adjusted securities offer higher interest rates compared to the inflation rate thus at any given situation I will have the opportunity to make money even thought it might be less than expected. The key thing here is that I will experience no loss rather I will get benefits of my investment decision, (Amadeo, 2010).
Stock market investment is one of investment decisions that favor any form of the inflation rate. This investment option adjusts to the environment helping the investor not to experience substantial loss depending on the situation. Investing in the stock market like Forex will help me gain a lot by trading through two currencies. When inflation will increase, I will start purchasing the currency that will be increasing in value and by so doing I believe I will earn profits that will help me feel as if inflation does not exist in the market, (Cummans, 2012).
Apart from Forex investment, stock market offers an option of investing in precious metals. I can as well decide to invest in precious metals simply because I know in the future when the inflation rate will be higher I will sell them at a profit. At that time when the value of a dollar will be low, evidence shows that the value of metals will be high. It means that I will get an opportunity to have extra money if I sell metals when the inflation will be high, (Stokes, 2012).
Inflation is a vital aspect in the world of economy. Inflation adjusts the direction economy moves in different angles. Evidence shows that inflation helps the economy set price of services and products. Without inflation, an economy may fail to set prices something that will make investors operate at a loss. It also adjusts interest rates for any given investment. The work of inflation to the economy is such relevant simply because it helps individuals decide the type of investments they tend to invest their money, (Hellerstein, 1997).
Reference:
Is this your assignment or some part of it?
We can do it for you! Click to Order!
