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Hedging the inflation crash

@oldwen
With the creeping fear of inflation that has been pushed back slightly but not permanently, there are many of us that are concerned about the "inevitable" inflation crash. With how much money the FED has been printing in both 2020 and 2021, there have been many alarm bells triggered warning about the inflation crisis. Many have been speculating that there will be a correction and some even claiming a full on market crash. For a new investor, it might not be simple to navigate the markets in these turbulent time. In this new series of posts, i will share my thoughts and opinions on some ways to protect yourself while investing in the stock market as fears of inflation induced correction takes place. The best and most effective way of investing is to Dollar Cost Average into fundamentally good stocks. In simple terms, it means buy now, buy when there are corrections, and continue buying. The reason for this is simply based on the confidence in the long term success of said company. The market condition does not impact the fundamentals of a company. Hence, a good company remains a good company even in market downturns. But the stock of a good company become a great stock in market corrections as investors can pick it up at a discount. So how to identify a fundamentally good company? 1) Strong moat and good balance sheet. You want a company that remains in demand not just in a booming economy but also one that has strong roots that cannot be uprooted by market conditions. For example, $Microsoft(MSFT)$$Coca-Cola(KO)$are great companies that have their business going strong in any economy. Their balance sheets are healthy with lots of cash flow and spare assets. 2) Consider price and growth. Evaluating the price of a stock and its actual value is another important step to identify good companies to invest in. There are many ways to estimate the value of a certain stock. One of the easiest ways to do so is via the P/E ratio as well as the expected growth of the company. Consider the P/E ratio of a stock to understand how much anticipated growth has already be priced in and evaluate for yourself if your expectation for the growth of the stock is higher than what is priced in by the market. By finding companies that are selling at discounted prices based on expected future growth, one can be confident that over the long term these investments will pay off. To conclude, investing in a volatile market requires lots of research and stable hands. Invest and DCA into stable and fundamentally good companies is one of the ways i go about investing in such turbulent times. And always remember that buying a stock for the long term is equivalent to owning part of a business. Therefore, make your decisions and judgement based on that.
Hedging the inflation crash

免责声明:上述内容仅代表发帖人个人观点,不构成本平台的任何投资建议。

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