Suze Orman: This is the only asset class with a track record of 'earning more than inflation' — here are 3 smart ways to buy it in 2022

Suze Orman: This is the only asset class with a track record of ‘earning more than inflation’ — here are 3 smart ways to buy it in 2022

With soaring inflation no longer “transitory,” according to the Fed, Americans are preparing for their purchasing power to take another hit in 2022.

But whether inflation is coming out of hibernation or we’re heading towards a bear market, Suze Orman, personal finance expert, says you should still lean on stocks for the long haul.

“Over the long-term stocks have produced the best gains after factoring in inflation,” wrote Orman in a blog last year. “Bonds and cash struggle to keep pace with inflation; only stocks have a track record of earning more than inflation.”

Orman’s advice is sound. But some areas of the stock market perform better than others during periods of high inflation.

Whether you’re looking to invest thousands of dollars or just your “spare change” from everyday purchases, the following three sectors might give you an extra boost in 2022.

1. Banks

Bank of America branch building in Beaverton at twilight

Hrach Hovhannisyan/Shutterstock

In her blog post, Orman says investors should be prepared for stocks to go through periods where their value dips.

But that also offers the chance to snap up more top-shelf stocks at bargain-bin prices. When the next pullback happens (and it will happen), there’s one place investors might want to look to first: banks.

Unlike the vast majority of other industries, banks actually fare well when the Fed tightens up because of their asset-sensitive nature. When interest rates rise, bank assets like bonds and loans tend to climb higher than their liabilities such as deposits.

Rising rates also mean that banks can earn a wider spread between what they pay out in savings account interest and what they earn from Treasuries.

Another great thing about buying bank shares is it’s like shooting fish in a barrel.

Just pick two or three of the country’s largest banks, like Bank of America, Citigroup and Wells Fargo, and you should have all the positive exposure to rising interest rates you need.

2. Insurance

Allstate Insurance Logo and Signage. The Allstate Corporation is the second largest personal lines insurer in the US

Jonathan Weiss/Shutterstock

Even when people slash their budgets to help offset rising prices, we know those auto and life insurance premiums will keep rolling in no matter what.

Which means although insurance may not be the most exciting industry, it’s a defensive business that can provide plenty of portfolio protection — especially since insurers typically earn better returns on their “float” when rates rise.

And on top of that, insurers often pay their shareholders dividends, which means you can count on a little extra cash a few times a year.

For those interested in investing in insurance, Chubb, Allstate and MetLife are some of the big, blue-chip names in the industry.

3. Precious metals

Gold and silver nuggets on black background. Precious stones, luxury concept and mineral drainage. Industrial activity, treasure and fortune.

RHJPhtotoandilustration/Shutterstock

When it comes to investing in precious metals, these stock picks can be worth their weight in gold.

Gold and silver have long been considered safe haven assets, meaning when all else fails, their value doesn’t really tarnish.

You can always buy precious metal bullion or coins, but mining stocks and ETFs allow you to invest in the space at a low cost and without needing to find storage.

Moreover, large diversified mining companies like Rio Tinto and Freeport-McMoRan also dig up metals like copper, which is currently experiencing booming demand due to its role in electric vehicle production.

Historically, the best time to make money from metals is when inflation is poised to keep increasing — like right now.

A finer inflation hedge in 2022

Andy Warhol gallery

Sergei Bachlakov / Shutterstock

To be sure, Orman’s advice overlooks several attractive inflation hedges outside stock market.

For instance, fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with very little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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