Stock Trading As A Hedge Against Inflation
A long term investment that protects against inflation are stocks. Over the last 20 years, stocks have out performed both bonds and gold, to yield an average return of 10%. A return of 10% is over the last 20 years has been made with the stocks that has out performed both bonds and gold.A single dollar invested into stocks in 1801 with dividends reinvested would be worth over $12.7 million today – that shows you the power of compound growth. Gold invested earlier will be at present worth over $32.84. If a dollar was invested on the bonds, it would be $18235. Instead of planning for next 200 years, you can plan your investments for next 40 years as we do not have such longer lifetimes. Those worried about inflation need not put all their money into the gold basket, as gold has historically not appreciated as fast as stocks during inflationary times.
Money must not be poured in a single stock or even a single nation’s stocks by the investors. Either in a single stock or even a single nation’s stocks, one must not pour the money. Funds can be put by the investors in the foreign stocks with diversification being the king. China, Turkey, Russia, Brazil and India are the mainly rapid growing countries. These countries have begun liberalizing their laws to allow foreign investors, and they growing much faster than the developed countries in the West. Though the potential returns are incredible, investing in foreign stocks has got a risk. Investors with ETFs like iShares MSCI Turkey Invest Mkt Index (TUR) and iShares MSCI Singapore Index (EWS) can do trading with the foreign stocks. Biggest indexes in Turkey and Singapore are tracked by these ETFs. In Turkey and Singapore, biggest indexes are tracked by these ETFs. Through online brokers that allow customers to trade foreign stocks, stocks in these countries can be chosen. Online brokers like Charles Schawb and Etrade allow foreign stock investing. Brokers who can meet your needs must be chosen before signing up. Best one can be found among various online brokers. Even if United States feels an inflation, there will not be any problem in the investments in foreign stocks that use their own currencies.
Through ETFs like United States Oil (USO) and SPDR Gold Shares (GLD), investors can put some money on the commodities. These ETFs allow normal investors to easily get into commodities without ever having to trade futures contracts or other complex financial derivatives. These ETFs are traded on the stock exchanges like regular stocks, so investors can purchase shares in them the same way they can in ordinary stocks. There are dozens of commodity ETFs currently available on the market from Platinum to Natural Gas. For every major commodity, ETFs are available and regularly, ETFs are being launched. A well diversified portfolio of stocks should include domestic stocks, foreign stocks and commodity ETFs, as these are all protected against inflation. Having cash in the bank is the worst during an inflationary environment, as the purchasing power of each dollar will diminish.
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