Should You Be Worried About Inflation?

September 15, 2022

Should you be worried about inflation? There's good and bad inflation. We explain both in this week's Arista Advice.

Full Transcript:

Hello, welcome to Arista Advice. Question of the week is: "Paul, should I be worried about inflation?" There is good inflation, and there is bad inflation, and good inflation helps the portfolio. It increases asset prices, real estate prices, domestic goods, monetary policy, and domestic policies. So inflation is good but too much inflation can ruin everything, and you really have nothing at the end.

The single best reason to expect inflation is that historically prices have generally moved higher. In fact, since the end of World War II, what used to cost a dollar in the United States has nearly risen 13 times over, and now costs $10 or more. The best way to hedge inflation is to own stocks, a diversified portfolio of stocks. If they're diversified, you will do well. Of course, that increase of the cost of living has taken place over decades, seven decades, and so let's keep things in perspective. When measured on an annual basis, the average increase of less than 4% looks much more reasonable.

The Federal Reserve's goal is to keep unemployment low and to keep inflation between two and four, and whenever it's below they are fighting it, and whenever it's above, they're fighting it, and they really got a fight on their hands right now with inflation, but I'm confident they'll bring it in and rein in the inflation horses, get them in the barn, so that we can go back to living a life of helping, serving, and doing good things for other people.

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