Investing in times of rising interest rates and high inflation is not easy, but it is quite a challenge. First, some considerations: Long-term commitment and strong corporate buy-in are still needed. But maybe there are some other things to consider.
For example, we can keep the cash cushion liquid again in fixed income products. True, this harvest is still quite small. But it is better than nothing to fight inflation at least a little. After all, rising interest rates also determine potential returns here.
But today, let’s look at how to invest in stocks specifically. Inflation and rising interest rates are definitely a construction site here. However, I see opportunities in defensive stocks but also in the growth segment.
With Inflation and Rising Interest Rates: Growth Stocks!
I am confident that we can invest in growth stocks to neutralize inflation and rising interest rates. We must be sure of one thing: innovation and good, high-growth business models deliver the best long-term returns. Classic examples like FAANG stocks have proven this for a long time.
Nevertheless, it is now more important to act selectively. If we want to invest here in times of inflation and higher interest rates, the quality should be there. Above all, a clean balance sheet is a must. A higher level of debt or balance sheet problems may mean that the business model may not be ideal due to such problems. The company remains very important.
At the same time, we need to ensure that, ideally, the market grows faster than inflation. And also that rising interest rates do not stop innovation. In real estate, for example, this is a problem. If you pay attention to these things, you can achieve growth rates and returns that will offset both problems. At least with a buy and hold approach.
Defensive and dividend stocks!
My second option for investing in times of inflation and rising interest rates is defensive and dividend stocks. Solid yields at least offset inflation. We all know that there are certain qualities here as well. Of course, a tidy balance is also part of it.
But another feature that should really be important is pricing power. If we want to counter inflation and rising interest rates, these stocks should be able to drive growth at a price. For example, to compensate for increased costs. But above all, to create growth that exceeds inflation.
After all, we can twist and turn as we please. But we can hardly avoid quality and some possibility of growth. This is the most relevant for me at least at the moment.
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