Inflation is perhaps the biggest problem in the market today. It’s hotly debated by economists, investors and policymakers, but just about everyone has an opinion about what’s going to happen. This creates a lot of uncertainty for investors of all levels.
If you want to keep a cool head and wait for inflation demand to settle, how can you protect your portfolio? With income investing based on real returns, Real Money Jim Collins Says Cash Flow Never Lies lie. In his recent column he writes:
“There are no more experts. In the last two weeks I’ve seen negative market comments from some of the oldies I respect the most, Jeremy Grantham, Leon Cooperman and even Dr. Doom himself, Nouriel Roubini, but the market doesn’t matter. In any case, no longer than 45 minutes.”
“The motto of my company, Excelsior Capital Partners, is ‘cash flow never lies,’ and as a retail investor, your cash flow is the flow of dividends you receive,” Collins says.
The way to combat inflation in your portfolio is, Collins writes, “to capitalize on it directly.” Look for assets that offer real, stable returns over the long term. Don’t get carried away by advertisements or long-term promises. What are those investments? Get more of Collins’ investment ideas and real money trading strategies.
Start with hard numbers. A simple search for the S&P 500, organized by yield, is a great place to start. Find the companies that have paid big, stable dividends and jump in.
“I don’t care about growth in dividends or reliability of payments… what I’m telling you is that in July 2021, Collins wrote. “The macro calls for a purely mechanical approach, so I stuck with it and finally found a decent list here.”
“If you are smart enough to get your investment advice from Real Money, you are smart enough to know which of those dividends are sustainable and which are not. Most are, and remember that in this Covid-19 ‘Delta’ variant world, energy = good, cruise lines/hospitality = bad.”
“Arm yourself with real returns to protect against valuation corrections. It works well,” he said.
For investors looking to protect themselves in an uncertain inflation environment, Collins’ advice is simple. Trust your returns and invest for cash. In other words, follow an income investing strategy. You may not know what’s going to happen with respect to capital gains or the market in general, but the cash flow in your account doesn’t lie.