How to Have Peace of Mind During High Inflation - Darius Foroux - Deepstash
How to Have Peace of Mind During High Inflation - Darius Foroux

How to Have Peace of Mind During High Inflation - Darius Foroux

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How to Have Peace of Mind During High Inflation - Darius Foroux

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The current economic situation

2022 is a year of inflation. It resulted from the huge disruption that Covid caused. The high inflation and low economic growth are all over the media.

  • Inflation is getting higher
  • Stocks are down
  • People are starting to get fired
  • Companies are barely hiring

Investment ads claim they have investment strategies to generate significant returns during inflation, yet famous hedge funds like Tiger Global are down 60%. So don't be seduced by investment ads that try to profit from fear and greed.

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Look at the big picture

When we're faced with economic problems, we can view them in two ways:

  1. Up-close perspective: Looking at inflation, interest rates, debt, consumer spending, joblessness, etc.
  2. Broad perspective: Looking at long-term trends and historical patterns.

Taking a step back for a broader view can teach us about what's happening now.

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Periods of high growth and low growth

Periods of high growth and low growth are not uncommon. For example, look at how the world went from the great 1920s to the Great Depression in the 1930s.

Investor Howard Marks discusses the concept of cycles in his book, Mastering The Market Cycle. He states that the economy grows, on average, at a consistent pace. The economy will get stimulated and make people take more risks and consume more. In turn, this period often causes inflation and slows things down.

Recessions and slowdowns are normal. However, when you invest long-term, these fluctuations won’t harm you.

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Avoid taking too much risk when the economy is booming. Likewise, avoid buying into things you don't understand.

Things only become troublesome when you make bad investment decisions during periods of high growth. For example:

  • You bought houses without income in the 2000s.
  • Or you bought stocks and crypto with borrowed money over the last year.

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The economy is affected by various factors out of your control

When you recognise economic patterns, you'll know that the current trends are expected and normal.

  • Knowledge. Learn more about how the economy and stocks work. When you have better knowledge of the history of finance, you won't fall for too-good-to-be-true investments. Read good books on personal finance that have stood the test of time.
  • Mindfulness. Knowledge will not give you full peace of mind, so practising some form of Mindfulness or Stoicism can help detach from money stress.

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