Before the COVID-19 pandemic took hold, inflation was not a major source of concern for retirees. Now, after trillions of dollars in monetary and fiscal aid to help the pandemic-ridden economy and the Federal Reserve’s new inflation policy, an inflation resurgence is poised to occur within the next few years – and many retirees are unprepared for the risks. Fortunately, it is not too late to build an inflation-resilient portfolio. Barron’s recently spoke with Paul de Sousa, senior vice president and investment advisor at Sightline Wealth Management, for insights on which asset classes retirement portfolios should hold to hedge against inflation risks.
One asset class de Sousa recommends is hard assets such as real estate. Real estate investment trusts (REITs) are likely the easiest option in this class because physical land can be pricey and difficult for the average retiree to buy. However, de Sousa cautions to take care when adding REITs to portfolios because some subsectors have been affected more than others by the pandemic. “Real estate is not a catch-all approach,” he explains.
Another asset class that can be used as an inflation hedge for retirees is gold. While strategists often have mixed views on gold, de Sousa advocates for it, saying that real assets like gold and other commodities have historically performed well in periods of higher inflation. Even without inflation, de Sousa believes everyone should have gold in their portfolios to take advantage of any sharp rises in gold’s price. “Gold is an insurance policy, something you need to own before you need it. Gold can move very, very quickly in a short amount of time,” says de Sousa.
To learn more about inflation and how it impacts our financial lives, click here.
To read the entire Barron’s article featuring Sightline’s Paul de Sousa, click here.