How to protect yourself if inflation takes off

People who make a living selling mutual funds and equities scare us all the time about inflation and tell us that we have to make a return precentage more than the rate of inflation to "stay ahead". What doesn't get mentioned is the fat commissions they make in the process. If inflation is 1.4, or even 1.9% now, you can easily make that in fully secure investments.
Save more than the rate of inflation, and you are always ahead. Keep it simple-GICs and CDs, and high interest savings accounts. Unless you live in a place like Zimbabwe, you'll be fine. If you could make enough money for the supposed retirement you are supposed to live from investments that all these people tell you to make, they wouldn't be in the business of selling you their wares. They would do it themselves quietly and not try to brainwash you.
Sure I invest some of my "throw away" money in equities, but only because I WANT to and because it is fun. That should be the ONLY reason to listen to financial advisors. Please don't risk your nest egg. It is too precious. A bird in the hand is worth two in the bush.

I disagree with your comment (made by Trepidum). You're advice is to invest your money only in risk free assets such as GIC's, T-bills and T-bonds, etc. Yes, this is a risk free way to earn a return (a very low one at that). However, financial advisors and portfolio alike are there to help investors earn higher returns with their desired amount of risk. At early stages in life, we are more open to risk as we can recover over the years and therefore the optimal portfolio would include a higher level of stocks than bonds and cash...A good advisor is there to suit the individual investors to their risk level, whether they be risk averse or risk loving) and design a portfolio to match their needs. Some people may be happy with earning just enough to be ahead of inflation, but others would disagree and find it a waste of potential. Stock indices tend to follow a postive upward trend in the long term, and thus with a long term view and properly managed portfolio, an investor is able to achieve a higher net worth by the time they retire. With the effects of compounding interest and plain and simply put "earning more over each year on average" creates a vastly higher amount upon retirement available. Take a look at the historical returns on the S&P/TSX Composite, and you'll see the benefit of investing in the stock market as long as you're prudent and smart about it. Alot of negativity towards advisors and portfolio managers is easily seen during a time where the market lost 40% of it's value. But you need to keep a optimistic view on our economy, and until then with the combination of a lack of consumer confidence and the lack of investment professional confidence will keep us in this state of financial turmoil.
Also, investing in the market is NOT investing your eggs in one basket. A properly managed porfolio has a combination of bonds, cash (money market), and stocks. Aside from the asset allocation, then you also have the security selection to reap the benefits of proper knowledge and research.

If anybody wants to discuss my comments or has any questions, feel free to email me at adamc.myles@gmail.com

Hello Adam,
Many thanks for replying and taking the time to take me on. It is appreciated. This debate is interesting.
I am presuming you do not have a conflict of interest (i.e. you are not a professional financial advisor). If so kindly declare.
I agree that what is lost is ONLY "potential" gains when one assumes risks. They are not real gains.
Of course, the historical returns chart is the first thing advisors show their new clients. If that is really so robust then why include the rider everywhere that "past performance is not a guarantee of future returns"? By the same token, it is not the responsibilty of the consumer to rescue the economy by regaining his/her own confidence and confidence in their investment professional. That is the job (conveniently shaken off) by the investment professionals who got us in to this mess in the first place with their unrestrained greed.
There is no excuse for a bond fund to go down in value. Bonds pay interest-the investor must see the gains directly. There is also no excuse for a money market fund not to reward the "investor" with a return equal to that of a high interest savings account. A money market fund is money under the mattress minus the salary and bonuses of the people who run it.
Why do 60% of mutual find managers not own any units in the funds that they manage?
I agree that you should not put ALL your money in one basket. We need a little fun in life with equities. But that's it. Any one making more than the median Canadian income can afford to be ultra-conservative with money. By saving, they will certainly have enough for retirement. There is no need to sustain financial professionals. However, these are the very people targeted by investment professionals.

It's all bullshit!

The government lies about the real-inflation rate to hide the fact that they are printing money out of thin air. See, the government is not in charge, because if they were, they would be printing the country's currency 'interest-free'. That is every government's constitutional right.

Instead, the government is beholden to the aptly named "Bank of Canada" which is a private bank controlled by a family of international bankers (all central banks are). The central bank prints money backed by nothing (fiat currency) and charges the government interest on the money they print out of thin air. This works for the government because they don't have to ask the "people" every time they need more money. That's why there are income taxes. Your income taxes go to pay the interest on all that money borrowed by the government. It's a system of debt where governments are beholden to the central banks and where the citizenry is beholden to governments via taxation.

In any case, all this printed money is the real cause of inflation. Prices do not go up, the value of your currency is going down. So they manipulate the data and tell you "inflation is a 2%", when in reality it's closer to 8%.

Best way to become poor is to keep your money in the bank. They give you 2% and then loan out 10x the money you give them at 4% (fractional reserve banking). It's a system of debt. More people borrow, more money get's printed, more inflation.

If you want to BEAT inflation, you buy ALLOCATED gold and silver (real money). That means you buy the real asset without counter-party risk. You also buy real-estate that gives you a good ROI via rents. Over time, you will be protected against inflation if you hold real-assets, not paper assets. I would rather keep most of my eggs in "my own basket".

Everything else is all smoke and mirrors!

invest in some good companys over the long term and you will be ok, stay away from MF..invest in ETF or index funds if you want to be in a diversified fund. Diversify the portfolio with different investment vehicles and sectors. Buy when everything is low and for sale..sell, never.

I challenge any mid-career or senior investment professional (Mr. Gordon Powers included) to produce ten clients who have made a return equalling (let alone exceeding) the historical chart over the mythical "long-term". For argument's sake let's call it 20 years. I also challenge anyone to answer the questions I have raised in my two earlier postings today. The smoke and mirrors effect is that with dollar cost averaging the regular contributions dilute the growth effect, making it exceedingly diffiuclt to accurately calculate.
The percentage gain/loss with various funds, stocks and indices that the media and your advisor reports is pure bunkum. Where should you start when reporting the percentage? 100 down to 80 is a 20% loss, but 80 to go back up to 100 requires a 25% gain. Never believe a percentage that a financial professional tells you without knowing YOUR baseline.
Most people will tell you that they have broken even or have made what they would have made in a GIC, and that too only because the fixed income component of their "professionally" managed portfolio compensated for their equity losses. Hard gold is fine to invest in, but how much can you realistically store safely?
If you cannot resist the equity bug, do it yourself by buying a low cost broad-based index fund at its low point. Nobody beats the index over the long term (Mr. Powers?) If you must buy equities, search the composiiton of a few hundred equity funds. You will find certain companies that keep coming up. Buy those. You don't need the mutual fund manager to buy it for you.

I thank you for your reply to my post..and I am not a professional at all..although I am graduating this month with a degree in Finance..and am starting my Master of Finance in september. I guess you could say I am biased, so no need to take my comments as absolute answers. Alot of what I was saying is "in theory" and I agree it may be difficult to predict the optimal market timing.. But contrary to an efficient market, there are always people that do beat the market.. even if it is by luck.
And wyhen I mentioned the money market as a section of one's portfio, I mean it in the literal definition of money market which includes short term obligations such as T-bills (guaranteed return)..it is said to be considered "cash" in a portfolio because it is extremely liquid assets. Many tend to have a larger % in cash in their portfolio when they have no confidence in the stock market.. and feel as though they want to wait for it to find "a bottom" to use that cash...
I enjoy discussing these controversial topics on investments, and if you are going to completely bash what I say then "have your way". But if you simply have counter arguements or opinions, then they are highly suggested. Thanks

Billy K....you nailed it, my friend. People, please read what he wrote above and listen well. It's clear that the only protection against the coming inflation is precious metals, chiefly, gold. It's REAL money, with intrinsic value, not fiat money you can use to blow your nose with.
Investors may say it's one of the worst performing stocks in the long haul, as it doesn't build interest. But it always flows within a ballpark range of the rate of inflation, meaning, with a simplified analogy, if the purchasing power of a dollar falls to half of what it is today, then gold would roughly double it's listed price....a true hedge against inflation as it's always of value, unlike our investments which are half of what they were just last year.
Name another stock that has stood up for 3,000 years...bet you can't. Precious metals are the way.

Thanks Adam,
All the best in the career which you have chosen for yourself. I am hoping that my words have resonated with you (I'm probably a few years older) and that you will think honestly twice or more before advising your future clients with all the buzz words of inflationary risk (the topic of this blog), percentage gain, professional management, long-term view, historical gains etc... If I have influenced one sincere person in the financial industry (assuming Mr. Powers doesn't reply) this was worth all the effort.
:)

How to protect yourself if inflation takes off?
Spent all your money(with max out your loan) now and go bankrupt. You are 200% protected! Inflation is the problem of the rich (or anybody with saving). If you don't have saving (even in debt), you don't have to worries about inflation. You take advantage the inflation. Just like our neighbour US. They stick to this strategic nationally. From government to citizen. Max out their debt (corporate bonds and government bonds). Inflation just help them to repay their debt less.
Inflation is a good thing if you stand on the right side of the coin.

hey people am not talking about inflation.because I nothing to trade.My question .Is our democratic government has gone crazy? went and were is legislators will lower taxes on people making 20000 dollars or less like me that are consider to be singles?I works in oil exploration[seismic]in Alberta and Bc 13to14hrs each day walking carrying 70 pounds on me in very cold envronment.