Five Star award winners Jennifer Lane

Planning and Investing for Inflation

Inflation is affecting us all. Home buyers and families saving for college certainly saw the cost of those big goals grow at an alarming pace. For the most part, though, increases in the cost of day-to-day living seemed pretty tame. Until recently.

While homeowners may not be affected by home price inflation, the cost of home renovations (when you can find a contractor) have caused many to put their projects on hold.

If you're renting or searching for a home, you're probably not surprised to hear those rents have increased 10 percent nationwide and home purchase prices are up nearly 20 percent over last year.

So, how can you manage your financial plan and invest your portfolio to stay ahead of inflation?

Plan ahead!

Savings

Money market and savings accounts pay such low interest that after taxes and inflation, your money is shrinking in value.
If your portfolio is small or you just like having savings tucked away separately from your portfolio, check out www.bankrate.com for a list of higher paying money markets or CDs.
If you have a good bead on your monthly expenses, you can more easily hold less emergency cash.
If you're fortunate enough to have a portfolio invested in 30-40 percent or more fixed income, you can hold less emergency cash because you have liquidity to allow withdrawals for unexpected expenses.

Investment diversification

Your stock funds can be a big help against inflation. Now is a good time to check your portfolio asset allocation if you haven't rebalanced in the past 12 months. You may find that your portfolio is over weighted towards stocks. If that's the case, it's time to sell some stock funds and buy bond funds to rebalance.
Bond funds can struggle a bit as the business cycle matures and inflation starts to loom. As interest rates start to go up (or threaten to increase) bonds can lose value. This isn't a reason to sell them, but it is a reason to look more closely at the funds you own.
The duration of the bond fund is an important measure. Duration is a measure of the interest rate risk or inflation risk in your bond fund. The duration combines the fund's maturity and interest rate as one easy-to-use measure. You can find your bond fund's duration on its profile at www.Morningstar.com. If we'd done an Investment Recommendation for you, your bond portfolio duration (the inflation risk of all your bond funds taken together) is listed in the Recommendation report. In inflationary times, we like to keep bond portfolios around 5-6 years in duration to limit inflation risk.

TIPS and IBonds

TIPS are Treasury Inflation Protected Securities. IBonds are Series I Savings Bonds. You can get both through www.treasurydirect.gov.
TIPS pay a fixed rate of interest. The principal value of the bond changes with inflation so that the money returned at maturity has kept up with inflation.
TIPS are available through mutual funds, exchange-traded funds (ETFs), and individually. Their interest income and growth in principal is exempt from state and local taxes.
IBonds have 2 interest rates

A fixed rate, currently at 0 percent.
A variable rate that changes every 6 months.

Currently, the variable rate is an annualized 7.12 percent. So if you buy a bond between now and April 2022, you'll earn 3.56 percent over the first 6 months until the rate resets.
You can purchase a limit of $10,000 in IBonds per year per person, held electronically in a Treasury Direct account.
You can purchase up to $5,000 in paper IBonds using your federal tax refund.

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This award was issued on 02/01/23 by Five Star Professional (FSP) for the time period 05/23/22 through 01/06/23. Fee paid for use of marketing materials. Self-completed questionnaire was used for rating. This rating is not related to the quality of the investment advice and based solely on the disclosed criteria. 3,923 Boston-area wealth managers were considered for the award; 578 (15% of candidates) were named 2023 Five Star Wealth Managers. The following prior year statistics use this format: YEAR: # Considered, # Winners, % of candidates, Issued Date, Research Period. 2022: 4090, 513, 13%, 2/1/22, 5/24/21 - 11/19/21; 2021: 4069, 480, 12%, 2/1/21, 5/25/20 - 11/30/20; 2020: 3580, 463, 13%, 2/1/20, 4/1/19 - 12/13/19; 2019: 3619, 566, 16%, 1/1/19, 4/18/18 - 11/6/18; 2018: 2819, 532, 19%, 1/1/18, 3/23/17 - 11/10/17; 2017: 2467, 623, 25%, 12/1/16, 3/26/16 - 11/23/16; 2016: 2530, 632, 25%, 12/1/15, 5/18/15 - 11/6/15; 2015: 3542, 801, 23%, 1/1/15, 5/18/14 - 11/6/14; 2014: 1707, 655, 38%, 1/1/14, 5/18/13 - 11/6/13; 2013: 2362, 713, 30%, 1/1/13, 5/18/12 - 11/6/12; 2012: 2591, 454, 18%, 1/1/12, 5/18/11 - 11/6/11.

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Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. The award is based on 10 objective criteria. Eligibility criteria-required: 1. Credentialed as a registered investment adviser (RIA) or a registered investment adviser representative; 2. Actively licensed as a RIA or as a principal of a registered investment adviser firm for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by FSP, the wealth manager has not; A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three settled or pending complaints filed against them and/or a total of five settled, pending, dismissed or denied complaints with any regulatory authority or FSP's consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through FSP's consumer complaint process; feedback may not be representative of any one client's experience; C. Individually contributed to a financial settlement of a customer complaint; D. Filed for personal bankruptcy within the past 11 years; E. Been terminated from a financial services firm within the past 11 years; F. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria-considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. FSP does not evaluate quality of services provided to clients. The award is not indicative of the wealth manager's future performance . Wealth Managers may or may not use discretion in their practice and therefore may not manage their clients' assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by FSP or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by FSP in the future. Visit www.fivestarprofessional.com.