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How To Hedge Against Inflation With Recession Proof Stocks - InfoBarrel
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How To Hedge Against Inflation With Recession Proof Stocks

By Edited Jul 13, 2015 0 0

Think you are going to get the most return on your money by leaving all of your wealth in a savings account or a low yielding investment like a bank CD? Then think again? Let's say you have one million dollars and you leave it in the bank. 30 years from now, it will be safe to say that had you left your money in a savings account that paid around 1-3% interest, that your initial investment would only be worth about half of your original investment, maybe even much less. The effects of inflation can eat away at your wealth if you are not invested in assets that either keep pace with inflation or can beat inflation year in and year out. The stock market can be an excellent hedge against inflation. The stock market has outpaced inflation for many years and now has never been a better opportunity to start investing in stocks. Read on to learn what you should look for in companies that will bring you the most return on your money and outpace inflation for years to come.

Your goal should be to have own as many recession proof stocks in your portfolio as possible. Owning recession proof stocks is a great way to hedge your wealth against inflation and make you even wealthier. These are stocks of companies that typically have been around for a very long time often more than 20 years, have excellent cash flows, have minimal debt on it's balance sheets, has a commanding presence in their particular market, and can pay it's shareholders consistent dividend payment even in a financial crisis or recession.

It's important that you think about companies whose products and/or services are going to be bought by people no matter what the state of the economy is. Think of cheap fast food restaurants that have been around for long periods of time. Does a company like McDonalds or a company likeYum Brands, a company that owns all of the Taco Bells, Pizza Huts, or KFC food chains come to mind? Think about products that people need to buy like razors, toothpaste, cleaning supplies, or diapers. These are all products made by giant blue-chip companies like Johnson and Johnson, Clorox, and Proctor and Gramble.

You need to also look at the financial balance sheet for the companies you want to invest in. Recession proof stocks typically, have a strong balance sheet. They have a lot of cash to make big acquisitions, buy back their own stock, and to increase dividend payments to shareholders. These types of companies are also making healthy profits from their business and tend to have minimum debt on their balance sheets. As a result, these types of companies tend to hold up well during recessions.

If you plan on investing in these types of companies that are recession proof and can make consistent dividend payments to it's shareholders, then make it a point to reinvest your dividends you earn from these stocks to buy more of the company's stock. This will allow your portfolio to grow at a faster rate and will make a you a even wealthier person.

Lastly, think of yourself as being a part owner of the company before you actually buy invest in it. If you look at investing in stock of companies as you becoming a co-owner of the company rather than you just investing in a piece of paper that says you own stock in a particular company, then you will be more likely to make better stock picks and invest in blue chip companies that will reward you and your portfolio in the future.

In conclusion, I will give you a starting point of some great stocks that I personally own stock in that are great recession proof stocks, I currently own McDonalds, Walmart, Johnson and Johnson, Microsoft, and Altria Group in my portfolio. If you are looking for a online brokerage company to use in order to invest in stocks, then consider www.sharebuilder.com. I have been using this as my online broker for a few years and the transaction and comission fees for you to invest in stocks are very low. Good Luck!

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