How to protect your wallet from the surging inflation.
1) How can fund investment help you hedge against inflation?
With inflation at 8%, saving money in biscuit tins/savings account is akin to seeing your money erode 8 cents for every $1 you own. Fund investments can help in 2 things: diversification and partial hedge. Inflation has made equity market more unpredictable - take it from Netflix and FedEx. Funds may help us to diversify and DCA progressively while waiting for market to return to normalcy.
2) What types of funds do you prefer? And why?
Money market fund at the current state, as it provides stable returns and high liquidity. This enables one to protect one's warchest from being eroded by inflation, and get one ready to deploy once market pivots.
3) What adjustments have you made to your fund investment strategies as the Fed imposed another big rate hike?
I am putting more money with money market funds such as the $Fullerton SGD Cash Fund(SG9999005961.MF$. This fund invests in short term deposits, which means it is quick to reflect the latest interest rates. If fed raises by another 75 basis point, we can be sure this fund will return proportionately as well. Earning money when stocks go down, not a bad deal.
4) Do you consider inflation a crucial factor in fund investment? Why?
Yes. Healthy inflation is reflective of a healthy economy, especially when coupled with higher wages, aka cost push inflation. Fund investment is required at every level of inflation. However, what is crucial is our flexibility to switch funds in order to adapt to changing conditions. Eg equity funds when economy is healthy, MM/bond funds during hyper inflation, etc.
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whqqq : Earning money when stocks go down, not a bad deal. Very well put.