How Inflation Can Affect Your Portfolio

Key Takeaways

• When mortgage rates rise (now around 5% vs. sub-3% a year ago), your home affordability decreases significantly—a $500,000 home budget may no longer be achievable without increased income
• Young investors 10-15 years from retirement should maintain consistent dollar-cost averaging in index funds during volatility rather than changing their approach, as they benefit from buying at market lows
• For short-term savings (3-5 years), shift money from low-yield savings accounts to CDs or money market accounts now offering 2%+ returns, which outpace inflation better than 0% returns
• Retirees can now build 5-year bond ladders with individual bonds/CDs at attractive yields, providing more certainty than bond funds whose prices fluctuate with interest rate changes
• Don't attempt to time interest rate or market movements; stick to a disciplined investment process regardless of Fed decisions, as historical attempts to time markets have consistently failed