It’s the best way to deal with inflation, says Suze Orman

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If you’re struggling with today’s high prices, this advice could make all the difference.

Key points

  • Inflation recently hit a 40-year high and many people are struggling to meet the high costs.
  • Finance expert Suze Orman advises people to invest their extra money rather than putting it into savings to fight inflation.
  • Historically, the stock market has a higher rate of return over the long term than any other type of investment.

Inflation recently hit a 40-year high, leaving many struggling with high prices for goods and services. If you’re going over budget or even using credit cards to pay for day-to-day expenses because prices have gone up so much, you’re not alone.

Since inflation makes everything more expensive, your money, including your salary and savings, doesn’t buy as much as it used to. And it can be very difficult to figure out how to handle this difficult situation. The good news is that finance guru Suze Orman has some advice on how best to cope.

That’s what Suze Orman says to do when prices are rising fast

According to Suze Orman, “equities are the best way to deal with inflation”.

This may come as a surprise to some, especially since the stock market hasn’t been performing well lately and many people have seen their investment account balances plummet. And Orman admits: “It’s not easy to see investments lose value.” So those who are stressed about buying or holding stocks right now are not irrational.

Still, despite the fact that you may worry about what your portfolio is doing, Orman says buying stocks is absolutely the way to go. And she provides a compelling argument as to why this is the case.

“Over the decades, stocks have provided the best real returns,” Orman said, explaining that stocks have beaten both bonds and cash in terms of return on investment (ROI). Orman warned that none of these other asset classes are expected to provide returns above the rate of inflation. “That’s the job of stocks in your retirement account.”

The “real returns” it refers to are the gains or losses of an investment after inflation is taken into account. She gives the example of a situation where inflation is at 3% and you earn 10% on your money. Your actual return in this case is 7%. And she explained that over the past 50 years, even during market downturns, the S&P 500 has gained 10.7% and posted real returns of 6.5% after inflation.

As these figures show, if you had continued to buy stocks during past recessions, your brokerage account balance would still have ended up increasing in real terms, leaving you wealthier even after accounting for inflation. And there is every reason to believe that this will be the case in this period of rapid price increases.

Should we listen to Orman?

When it comes to protecting your money from losing ground, Orman is absolutely right that stocks are the best way to do it. The interest rate on almost any other investment that has a reasonable level of risk is going to be much lower than the rate of return on stocks — and you can’t afford to accept a very low (ROI) when inflation is so high.

So as long as you understand how to invest and are committed to investing for the long term — without bailing out at the first sign of trouble — you should listen to Orman and consider buying stocks with money you can spare.

If you have funds that you won’t need to use in the next two to five years, putting them on the market is almost certainly the best thing you can do to ensure that your hard-earned money doesn’t lose value.

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