How To Invest In The Time Of High Inflation

30 August 22

It is 2022, you are finally in a position not to live paycheck to paycheck. Each month, some money is left for you to put away under a mattress for that rainy day. All seems well until you realize the old trusty mattress has gotten quite an appetite in this day and age. In Lithuania, for example, if you were to save your money, you would be losing 20.5 percent to inflation annually.

If this got your attention, let’s look at how one of the world’s most successful investors – Warren Buffett – invests during inflation.

Firstly, it is important to look for companies that can easily increase the prices of their products or services without losing their market share or sales volume. If you were to invest in a company that targets customers in the poor or lower-middle-class income groups, likely such a company would not be able to increase its prices without losing sales. 

On the other hand, if you were to invest in luxury brands that target customers in the upper-middle class or rich income groups, the buying power of these customers would likely not decrease during times of high inflation. This means that such companies are able to keep their sales volumes after increasing the prices.

Secondly, you would want to look for businesses that are already well established in the market when it comes to re-investing back into the business. Here is an example: companies like Coca-Cola. The infrastructure, all the sub-brands, marketing, and brand awareness are already there. Giving the company a huge advantage over newer beverage companies that still need to establish themselves by investing huge amounts of capital back into the business.

Keeping these points in mind, the most important thing is to stay focused in the long run and not expect high short-term returns in this market.

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