Sneaky Inflation Can Make You Pay Higher Taxes Personal finance
“Since many industries are experiencing labor shortages, workers are in a better position to negotiate wages,” says Alvin Carlos, Certified Financial Planner and Managing Partner of District Capital Management.
How far do you have to go to ask for a higher salary? To beat current inflation, you need to aim for an increase of 5% or more.
In addition, stick to your long-term investment strategy. Over the past century, the average annual return of the stock market before inflation has been around 10%.
“Not many people think stocks are a good hedge against inflation,” says Carlos. “But if you look at the data from the last period of high inflation we had in the 1980s, stocks were actually the rate of inflation.”
Carlos writes in his newsletter that “during the period of high inflation from 1966 to 1982, S&P 500 stocks returned 6.8% on an annualized basis, corresponding to the rate of inflation.”
But remember not to keep your eggs in one basket. A diversified portfolio should include a healthy mix of stocks, bonds, cash and alternative assets. You can work with a financial advisor to develop a personalized strategy. Or consider a robo-advisor, who can create an automated diversified portfolio based on your personal situation.