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Inflation Proof Your Savings by Trading and Investing



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Inflation frightens everyone. Germany in the 1920s had horrendous rates of hyperinflation that destroyed everyone’s savings. It was so bad a loaf of bread might cost 50,000,000 marks in 1923, as opposed to “only” 4,000,000 in 1913. Is inflation eating away at your savings?

Trading and investing in stocks could protect your savings, even grow them. But trading the wrong way could burn through your life savings in a few months. So, let’s look at how you might use trading and investing to protect your savings from inflation.


How Many Risks Are You Happy With?

Trading Risk


You MUST understand risk before you consider trading or investing. Every time you put money in a bank there is a risk that the bank will go bust and you will lose your money. That risk is very small. So, does that mean you should leave your money in your local bank? It depends on how tolerant you are to risk. One thing is for certain, when you withdraw your bank funds, they will buy less than when you deposited them.

At the opposite extreme, would be to put all your money into Bitcoin and withdraw it next week. Bitcoin values could double, but they could also halve.

You must decide the level of risk you are prepared to tolerate. Transactions with bigger risks often have the potential for a bigger profit, but they can also go drastically wrong. Lower risk strategies generally have lower profit potential, but also less chance of losing your capital.

Trading vs. Investing


Buying stocks and shares is a good way to beat inflation over the long term. They might go down in the short term, but over five to ten years your shares’ value will probably increase by more than inflation. Nothing is certain and profit or loss depend on the exact dates you buy and sell. Investors ignore short-term ups and downs and hold for the long term.

Traders buy for the short term. Many traders will buy and sell within a few hours. You can make more money trading than investing over the short term, but there is also more chance of losing money.

Stock Market Investing


You can buy shares in any company on any stock exchange, but you need to think about ways to reduce your risks. Putting all your money into two or three stocks is a high-risk strategy. You need to spread your funds over at least ten stocks in different market sectors to minimise the chance of losing money. You may be unhappy about putting that much capital into stocks and shares for years to come.

Trading an Index



Index trading is a safer way to invest in stocks. You can start with less than ZAR 3,000 (about USD 200). You can trade CFDs on South Africa’s FTSE/JSE Africa All Shares Index on the Johannesburg Stock Exchange.

A CFD is a Contract for Difference. It is a way of betting on whether an index will rise or fall – You never own any shares. If your prediction is correct you make a profit. If your prediction is wrong you make a loss. If your bet wins, the broker pays you the amount the contract value has gone up or down. If you bet wrong, you pay the broker the amount the contract value has gone up or down.

Most brokers make it simple to trade CFDs. You can get the hang of the CFD market by trading virtual CFDs for pretend money. When you switch to the real thing you can limit the amount you could possibly lose when you take out the contract.

Trading Cryptocurrencies


Bitcoin prices make the news most weeks. Does that mean you should invest in crypto? Prices go down and up all the time, in crypto as with any company’s stock. Buying Bitcoin is extremely risky in the short term, though it might pay off long term. You can buy Crypto stocks or crypto CFDs. Both are less risky than buying coins.

Trading Commodities

Trading commodities

Maybe you think gold is the way to go. Maybe it is, maybe it isn’t. Gold prices usually rise when the world economy is messed up. The best time to buy gold is if you have a crystal ball that will let you predict economic disruptions that will cause the price of gold to spike.

You can trade many commodities, from wheat to tin, and you might get lucky, but you should only consider the commodity markets if you are a professional trader with a high risk tolerance.

If you really want a share of the commodity action then look at commodity CFDs as a less risky way to play.

The Short Version

TRading Strategies

You can protect your savings by using sound investing and trading strategies. There will be risks of losing some or all of your money, but there are ways to reduce these risks.

Trading index CFDs stands out as having the most profit potential, not least because you can make money even when the market is headed downwards.

Rachel Adams

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