Six tips to beat inflation

2021 closed with 6.4% inflation, a figure that represented the highest since 2008, which was mainly sustained by the 7.97% rise in the items of food and drinks, Y rental housing, fuels and electricity (13.27%); according to the National Institute of Statistics and Informatics (INEI).

It is a reality that life is becoming more expensive and, for this reason, as doubts arise about how to take care of our savings and investments and deal with the inflation.

In general, finance experts recommend putting savings to work and investing to protect the real value of our money; that is, obtaining an income above inflation. For this reason, Renta 4 SAB offers a series of recommendations that will help citizens beat inflation:

– Take stock: Before betting in a context that generally implies uncertainty, for any of the instruments available in the financial market, it is essential that you make a balance between the amount of money that we can use for this purpose and the risk that we are willing to run.

– Prefer inflation-protected assets: assets exposed to commodities, especially precious metals, are those that offer the greatest protection against inflation. Then there are the actions of other sectors to the extent that they can transfer the higher costs to consumers. Sectors such as pharmaceuticals, real estate and electricity.

– Try to avoid suns: Inflation is one of the different factors that affects the value of the local currency and in general the relationship is negative. A key factor is where the local currency interest rate is going relative to the dollar interest rate. Currently, the Central Reserve Bank of Peru (BCRP) has been raising the local rate to control inflation (3% on January 6) and something similar is expected in the US economy, so this effect of rate differential would be offset .

The question is which economy has more room to raise rates without affecting employment, for example. Other factors that impact the exchange rate are the growth of the economy, foreign trade and the management of local politics. Considering all this, it would be reasonable to think about preferring the foreign currency.

– Get away from fixed income: in the face of inflationary pressures, fixed income is the least recommended, since it offers a fixed rate that will not change as inflation moves, unless you buy an inflation-indexed bond, but of those there are only sovereigns They usually don’t trade much. Going back to a traditional bond, its price will tend to fall in anticipation of a rise in interest rates to offset inflation.

However, the instrument can offer a good return in the desired time horizon and this can be above the inflation expectation, but in the end there is the question of what level inflation ends up reaching.

– Diversify savings: Given that inflation means less purchasing power in general for consumers, in addition to betting on sectors already mentioned, diversifying between these sectors is key. On the other hand, regardless of the sector, you can find good companies that, due to their solidity, can offer good protection against inflation, they are known as “value stocks”.

– An alternative is real estate: If you do not want to bet on stocks or bonds, one option is to go to the so-called real assets; that is, those tangible assets such as real estate or land, which correct both their price and the lease flows with respect to the variation in inflation.

It is a type of long-term investment that is highly advisable as long as the funds are not required to be available in a few weeks or a return is expected to be obtained quickly. In case a direct investment does not work for you, there are currently a couple of funds listed on the Lima Stock Exchange (BVL) that bet on the real estate sector (called Fibras) and you can also find a wider variety in the international market with ETF’s .