What You Need to Do Not to be Crushed by Inflation

The inflation monster has resurfaced in recent years. According to TUIK data, November inflation was 21.31% on an annual basis, while Economist Prof. According to Steve Hanke, 100.65%.

High inflation, which is one of the chronic problems of our country; It eats away at our savings, our assets, and lowers our purchasing power. Turkey has the highest inflation among the top 10 countries. In this list, besides us, there are Venezuela, Sudan, Lebanon, Syria, Suriname, Zimbabwe, Argentina, Iran, Ethiopia, Angola.

In our country, especially young people are not accustomed to a high inflation environment.

For this reason, especially of the younger generationwill need to know inflation well and know how to live with it in the most reasonable way. Of course, everyone should do this, but we know that older people may have some experience in this regard, as Turkey has experienced years of high inflation many times before.

Inflation will be long term. Many experts now predict that this business will continue next year.

The dollar rate, while credit growth goes like this, is the same as inflation. is expected to grow stronger. Your purchasing power decreases, you become poorer, but there is no “realistic” explanation for how long this will last. You have to take your own precautions.

So how should you protect your investments at this increasing inflation rate?

How will you manage to survive in such an inflationary environment and get through the process as undamaged as possible? Here, we have compiled the suggestions for you from the statements of 3 different economists.

Get the products you need as soon as possible. Because the prices, which are constantly moving upwards in the inflation environment, force people to spend, not to save.

The price of a good not purchased today will most likely increase in the future, but revenues will not increase at the same rate. It is always more profitable to buy today. While this causes savings to shrink, it strengthens the borrowing tendency of households.

The opposite of this situation has been experienced in Japan for many years. In Japan, where there was disinflation, that is, the general level of prices fell, people constantly postponed their non-urgent consumption, thinking that “the price of what I will buy will fall anyway”. The negative impact of people’s consumption reduction on the economy was quite large.

If you are going to buy something, you have to buy it in installments. If you can buy it in installments for the cash price, it makes more sense to buy it this way.

If you are thinking of buying an item in installments, you should buy it immediately because the prices are raises regularly. If you can’t get it in installments, if you have money, you should buy it with it. After that, you should not buy anything until this process is over. You have to grit your teeth with the money you have and what you earn from the investment and endure the process.

After this process is over, there will be a stagnation in prices, then there will be increases in the real effective exchange rate again, the Turkish Lira will start to gain value again, and your purchasing power will start to increase again. Then you can spend your time.

If you don’t have the money to buy an item, don’t be afraid to borrow anyway.

If you can get a loan at a rate that is below inflation, you can borrow money, especially to cover large purchases. Inflation in the future repayment of the loan will make it easier.

You can make a kind of savings by buying plenty of products that you use constantly in your daily life and that you consume quickly.

Products that are constantly increasing in price, do not take up much space, and that you will constantly need, in an inflationary environment. buy wholesale it will be very useful.

Let’s come to the most important issue… How to invest in an inflationary environment?

Investing in an environment of high inflation is quite difficult compared to the investment choices to be made in normal times. Because you have to take into account number of variablesincreases as inflation increases. Moreover, it becomes difficult to calculate the real return on your investment, namely the inflation-adjusted return.

It is also very important that inflation varies from person to person. If the inflation rate for the items that make up the majority of your expenses as an individual is higher than the headline inflation, then your your individual inflation will also be higher than official inflation. Therefore, the return on your investment should be high. For these reasons, making the right investment in an inflationary environment is a very complex process.

However, especially in countries like Turkey, in the turmoil of the inflationary environment, there are some investment tools that cut the rope like a knife that they cannot solve. The most prominent of these is real estate investments.

Since shelter is one of the basic human needs, prices tend to increase at least as much as inflation, regardless of official inflation or conditions. lately house prices and rents We know it’s growing very fast. In fact, one of the main reasons for the sharp increase in rents stems from the difference between felt inflation and headline inflation.

The real estate sector, by acting close to the realities of life and mathematics, attracts its investors. manages to avoid inflation. However, if high inflation persists for a long time, the real estate sector may not offer real returns, as loan interest rates will remain high. But the probability of protecting you from inflation is quite high.

If you have money, it makes sense to buy real estate, but you have to be very careful.

You should buy real estate in a good location, not anywhere. When buying real estate, you need to examine it well and decide accordingly; and this property, even after this process is completed you have to buy to sell, not about to hold.

Because this process will be completed one day. Interest rates will rise seriously, and when the interest rates rise seriously, it will be difficult for the people to sell anything when the interest rates increase, as the purchasing power of the people is already low and the housing prices have already reached the ceiling.

Some of those who have become unable to sell anything will go bankrupt because they cannot pay those interests, and they will try to sell their assets cheaply. So that it doesn’t explode in your hand You must buy to sell.

One of the products that managed to maintain their value in the inflationary environment is the products that are imported and have no substitutes.

Imported products are priced in foreign currency and sold by converting to TL with the current exchange rate. Hence, high inflation low impact rate. This is the story of those who bought a car in Turkey in recent years, and after using it for 4-5 years, they were able to sell their car for the money they received.

Actually financial literacy Those who are at a certain level know that when they sell that car for the same money, they lose money as real income and they cannot buy a new car with that money, but still, the fact that a consumer good can be sold for the same price even after a few years of use is a clear indicator of inflation in that country.

Investing in the stock market also offers a very high potential. So how should you invest in the stock market?

You can invest in the stock market directly or through a mutual fund. If you are doing it through a mutual fund, you should look at the fund’s prospectus and pay attention to the possibility of stock ratio in the fund’s benchmark.

So if it says 80%, this is low, it should be at least 90%, even 95%; should be higher if possible. After that, you should also look at the management fee. No exorbitant management fees. You don’t need a fund; you can get three or four, if one goes bad the others can go well.

If you want to buy the stock itself, so you don’t pay the management fee; then you can get attractive shares (you can research them yourself). Those who have jobs abroad and those who earn foreign currency may be preferred. Of these portfolio of 15 shares You can create, at least 20% of it can be banking shares.

If you bought a dollar, you have to keep it, in such an environment it does not make much sense to exchange dollars.

If you are not good at trading, you can be content with keeping the dollars you receive. You can add as much money as you can. You may not be able to protect yourself against inflation by buying dollars. Because the dollar rises first, inflation comes after. The dollar has already increased enough, maybe it will increase a little more from now on, but it may not increase enough to meet the inflation.

The biggest enemy of inflation, or more accurately, the biggest antidote to inflation is gold.

In such inflationary environments, due to the limited production of gold and the fact that the huge amounts of money printed all over the world in recent years have shaken the confidence in banknotes, It is a long-term protective shield. Although we observe volatile movements from time to time, it is not acceptable for general finance theory to keep gold prices stable for a long time in an environment where inflation is high.

Households have been investing in gold and foreign currency for years to protect their savings against inflation. 55% of the total deposits in the banking system are in foreign currency.

It is often complained that the financial literacy of the public is low. However, when looking at the long-term data, the public’s interest in the return made the right analysis and appears to have made the right choices.

Here, it can be said that the interests of households and the state conflict with regard to foreign exchange investments. By giving weight to foreign exchange investments, households also contribute to the increase in the foreign exchange price in some way. But inflation from the crushing effect There are not many options for those who want to be protected.

Negotiate a salary increase.

Any increase in your salary that is less than the inflation rate de facto represents a pay cut. Because your purchasing power is low your actual wage will decrease. Workers must negotiate annual wage increases for workers whose unions have been affected by inflation.

Undoubtedly, we all wish that the inflation in Turkey would decrease as soon as possible without the need for the above hedging methods, and that it would fall back to reasonable rates again.

But until that happens, as a citizen “perceived inflation” you have to try to feel as little as possible.

Resources: