How to Protect and Grow your Money in the Current Environment

Right now, investors are scared. Inflation is going through the roof, and the Fed just approved a 50 basis-point rate hike at this week’s meeting. Stocks have taken a beating. Russia and Ukraine are still at war. And some people are even beginning to mutter the word recession.

As a result, some readers may be thinking about selling stocks, cashing out, and stuffing money under the mattress.

And I get it. I really do. We live in uncertain times, and the media endlessly pushing panic on us doesn’t help.

But don’t go shoving your money into holes in the backyard or even just sticking it in the bank just yet.

Because that’s the worst mistake investors can make right now.

Let me explain why…

The Worst Mistake

Hi, my name is Jason Bodner. I’m the editor of Outlier Investor.

I spent over 14 years on Wall Street and another four years in “The City” – London’s Wall Street. And since that time, I’ve started two hedge funds and created a proprietary stock-picking system to track the markets.

That’s given me an inside view of the way the financial system works… and shown me how to identify opportunities most people can’t see.

And now I like to use my experience to help everyday investors.

That’s the purpose behind today’s topic… because I can see the trap waiting for investors right now.

Despite the temptation to “play it safe” amid the current uncertainty, the worst mistake that you could make right now is to leave your money sitting as all, or even mostly, cash.

[Confession: PhD Economist says “Used to think a crash was coming…”]

As of writing, the best “high-yield” savings rate I can find is 0.75%. More often, they’re still sitting at 0.5%. Yet if we have $100,000 invested at even a 0.75% rate… over the course of a decade, we’ll only earn a paltry $7,758 on our cash.

(Of course, stuffing your money under the mattress won’t make you a penny in that time frame.)

The truth is, if your money isn’t invested, then it’s guaranteed not to grow – especially with inflation hitting 8.5% as of the last Consumer Price Index (CPI) report.

Inflation is the ultimate killer. Without investing, inflation will erode your cash and its buying power.

Consider this… If inflation stays where it was just last month, then in five years, our buying power would decrease by over 40%. A nearly $10 gallon of gas could become the new normal.

Now, I’m not saying that’s going to happen. But with the current trend, inflation is here for the foreseeable future.

As I’ve written recently, the Fed can’t raise interest rates to fight inflation too much or too quickly without shooting itself in the foot. The national debt levels are simply too extreme for it to do so.

As a result, we need to acknowledge inflation as a deadly threat to our money.

So if cash isn’t a good option… what should we be doing with our money right now?

What Should We Be Doing?

I have a few tips for folks looking to protect and grow their money in the current environment.

(Keep in mind – I’m referring to money that’s not being used for daily needs or saved up for a new car or vacation. This is the money intended for retirement or other long-term plans.)

[Former Goldman Sachs Exec: “America’s problems explained in ONE chart”]

First, if you’re working for a company that offers it, max out your 401k – especially if you have an employer contribution match.

That’s when employers will match the money you deposit into your account up to a certain percentage. For example, if you contribute 6% to your 401k, your employer might match up to 3%. In that case, it’s basically free money, and you can start pulling from this account at the age of 59½.

Another great way to plan for the future is by putting money in a Roth IRA. These are the “pre-taxed” accounts that you may have heard about before.

You pay taxes on the front end when you put your money into the account. But when you pull your money out in retirement – after it’s grown multitudes from your investments – you can do so tax-free. In 2022, the annual Roth IRA contribution limit is either $6,000 if you are under 50 or $7,000 if you are 50 or older.

Over the last 100 years, stocks have gone up 10% per year on average. In some years, the market goes up less. In others, it’s more. But it all averages out to 10% growth per year.

If we invest just $5,000 per year from the time we’re 25 until age 65, then we could amass over $2.4 million – and not have to pay taxes on a single cent of our gain if it was held in a Roth.

That’s the power of reinvesting and compounding that growth over time.

And like 401ks, investors can also start pulling from their Roth account without penalty at the age of 59½.

So if you’re not yet using these two investment vehicles, I recommend getting started now.

The power of investing is an incredible thing… and you’re guaranteed to lose out to inflation if you’re not taking advantage of it.

And whether it’s in a 401k or a Roth IRA, investing in dividend stocks of businesses poised to benefit from inflation will trump anything else over the long run.

Talk soon,

Jason Bodner
Editor, Outlier Investor

[Exclusive: Nomi Prins – The #1 Stock for America’s Great Distortion]

Read more from Jason Bodner at BrownstoneResearch.com

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