Diversification and patience are key in inflationary economy

To protect retirement accounts amid this inflationary economy, a local financial advisor says the key is diversification and patience. 

Jim Foote, senior corporate retirement plan specialist with Stonebridge Financial Group, said while the financial markets have been volatile over the past year, consumers can help protect their investments by making sure their portfolios hold a mix of investments. 

In addition, he said, make sure to pay a fair price, keep costs low, ensure flexibility and access to all accounts and leverage technology. 

Foote, a 32-year veteran in financial services who recently joined Stonebridge, said, “My advice right now is to buy and hold a diverse portfolio.”  

The self-described optimist said, “I think there are going to be rough patches ahead. Everyone will be impacted, especially those closest to retirement.” Think age 60 and older, he said. 

In fact, Foote said he believes the first half of next year will be tough. “Inflation is here to stay for a while.” 

Some in his firm, he said, believe things will start to turn around in the second half of next year, but considering the multitude of factors that go into the strength of the economy, no one can predict for sure. 

COVID-19 was the catalyst for the economic woes, he said. The “excessive spending” by the federal government and the now strong labor market added to it.  

The global political climate, including the war in Ukraine, the unrest in China, the supply chain issues, and others are also contributing to the current economy, he said. 

“Even though we are in this situation, the market is cyclical,” he said. “Be patient and don’t make hasty decisions. It will get better; the question is when.” 

Inflation is a concern, Foote said. “The Federal Reserve is trying to control it. They’ve raised interest rates 75 base points three times now and are set to raise it another 50 base points soon.” 

Foote said energy is a solution. While there is a push for electrification, Foote said limiting oil production is not good for the economy. “I’m all for clean energy within reason,” he said. 

“You can’t go from fossil fuel to electric overnight. Ninety percent of cars are gas or diesel so common sense is needed,” Foote said. “The middle class can’t afford to go out and buy an electric car and we have oil capacity and resources here.” 

Foote said the interest rate hikes are the Fed’s way of trying to control inflation. “The federal government has to stop printing money and putting it into the system,” he said. “We need to increase gas production and slow down hiring.” 

The major impact of the current inflationary state is on those ready to retire, Foote said. “Many people will end up working longer because their 401K can be off 15 to 20% right now.” 

Those that have recently retired, which Foote said includes people who took early retirement due to the pandemic, are being hit. “Sixty percent of those interviewed said they don’t think they will have enough money. Some might have to find work to supplement,” he said. 

His advice is to keep as much money as possible invested and only take what is needed. “Keep investing and take advantage of the price points,” he added. “You are buying low, and the goal is to buy low and sell high.”