Expenditure on food, transport, holidays and health care is set to rise as inflation hits multi-year highs. One investing idea is to buy stocks related to what we spend on
Inflation is now at a multi-year high, prompting central banks to hike rates to curb this scourge which threatens to lower our standard of living. For consumers, the direct impact of inflation is the erosion of their purchasing power as businesses raise prices to cover the higher costs of fuel, raw materials, manpower and rental.
The Monetary Authority of Singapore is helping to negate the impact of imported inflation on Singapore’s economy by strengthening the Singapore dollar versus the basket of trade-weighted currencies. By doing so, it hopes to relieve the upward pressure on prices of everyday items.
One way consumers can deal with inflation is to be more careful in their spending. They could also try to turn this problem on its head by investing in the shares of locally-listed companies providing daily goods and services. By doing so, they could also cash in on higher selling prices — be it via higher stock prices or dividends, instead of just spending their disposable income. In short, consumers can earn some money while spending money.
Fortunately, it happens that there is a long list of such stocks traded on our very own Singapore Exchange (SGX). The Edge Singapore has broken it down into a few big baskets, based on a few typical consumer profiles categorised according to demographics.
By understanding what these companies do, we can approach these businesses not merely as consumers, but as potential investors. Through daily interactions with the goods and services provided by these companies, we could conduct some form of ground-up research, gaining a better understanding of how well these stocks might perform, which, in turn, will enable us to assemble a robust portfolio of stocks to own.
See also: Is beaten-down Sats worth buying at current levels?
As you would read later in the profiles of Samantha, Joey and Robert, Singaporeans interact with publicly-listed stocks all the time, and taking a deeper look at the way we live our lives can help us find investment opportunities, especially in the stocks we are familiar with.
This is not to say that these companies, being big, visible and well-known, will definitely be money-spinners or the proverbial golden goose. Investing in stocks always carries risks, and due diligence should always be performed on one’s investment strategy. Furthermore, the risk appetite of each investor is different and so is their investing experience.
Promising investments can turn sour or you might discover a hidden gem and reap a financial windfall. However, with enough knowledge, an investor can make an educated investment decision, mitigate the risks and, hopefully, achieve some returns and be less worried about inflation.
See also: Union Gas moving into new markets but seeing near-term cost pressures
Take a closer look at some of the stocks our fictional profiles encounter on a regular basis:
- These are the stocks on the SGX that someone in her 20s may encounter
- These are the stocks on the SGX that someone in his 40s may encounter
- These are the stocks on the SGX that someone in his 60s may encounter