Investing in a Time of High Inflation

Should you risk your hard-earned money?

Alena Mae Flores

veteran business journalist

Inflation isn’t always bad news to investors when they have investment hedges like real estate and stocks.

Inflation, the rate in which prices of goods and services increase, reached over 6.7% in the Philippines this September, causing concern among businesses and consumers.For consumers, this means they get fewer items for the same amount of money. But why should this worry businesses, too? Because inflation also reflects a decrease in the purchasing power of the Philippine peso. This means lower sales and earnings, thus affecting the growth of businesses, pause on expansion plans, and a stunted local economic growth overall.

But is it a good idea to invest during high inflation? What are the risks associated with it? 

FWD Insurance asked some entrepreneurs, businessmen, and everyday Filipinos whether now is a good time to invest and where to invest their hard-earned money during high inflation and soaring prices of goods and services. 

Ron Jabal, chief executive officer of PageOne Group, says investments should be made regularly regardless of whether inflation is high. PageOne is the holding firm that owns advertising, public relations, digital and people resource companies.

“My investment philosophy has always been this: “I should have investment yesterday…” Since it is very difficult to time when best to invest, I have always subscribed to cost averaging. This way I ride with the crests and troughs,” said Jabal.

Jabal added that stock prices are low at present, which could be a good investment venue. “Despite volatility, this is the time to buy. We have seen some (stocks) soar since the market hit 52-week low a few months back.” 

Philippine Daily Inquirer columnist April Lynn Tan, in her article released in June, believes that investing at the stock market during high inflation is still a good option.

“With analysts giving the Philippines a positive long-term view, I believe that economic conditions will eventually normalize. Once this happens, mean reversion dictates that stocks should again trade at their historical average valuation or P/E, handsomely rewarding anyone patient enough to sit through these tough times,” Tan wrote. 

She further underscored the importance of patience and the value of long-term investing. “Patience is very important, which is why we always emphasize the importance of risk management. Use only long-term money when buying stocks during steep corrections, and accumulate stocks slowly instead of buying all at once since we don’t know when and where prices will bottom. Finally, diversify to protect yourself against an uneven recovery among the different stocks.” 

Real estate investment is also seen as a wise choice even during times of high inflation. “Periods of inflation may seem bad news for the average consumer but it isn’t always the case if you have investment hedges like real estate and stocks. It all boils down to how much you’re willing to risk (as is the case for any investment) and how wisely you protect your portfolio,” said Voltaire Palana, marketing officer of Digiscript Philippines and a former journalist.

“It’s also important to diversify so you spread your risk across a variety of holdings,” Palana said.

'Periods of inflation may seem bad news for the average consumer but it isn’t always the case if you have investment hedges like real estate and stocks. It all boils down to how much you’re willing to risk and how wisely you protect your portfolio.'

In fact, the Philippine real estate sector has been booming in recent years, with some calling 2018 as a record year for the sector. “During times of inflation, real estate is the best. Location, location, location. As Warren Buffett said, invest when there is blood in the streets and run away when everybody else is chasing the market,” said Rogelio Quevedo, professor of Commercial Law at the UP College of Law.

According to the latest report of Colliers International, a top tier global real estate services and investment management company, Metro Manila office market is on track to posting record-high supply and net take-up for 2018. This is because outsourcing firms continue to expand and account for the largest share of transactions.

Colliers also forecasts that from 2019 to 2021, average rent across Metro Manila is expected to rise by 9% annually on average. Colliers sees Ortigas Center and the Bay Area recording the fastest acceleration in rents during the period.

“I’m investing in real estate because the resale value can go up and there is rental income derived from it,” said Ruth Owen, president of PhilCarbon Inc. 

Investments, however, should not be taken lightly. Find a good a financial advisor, who has a proven track so your investments are well protected, no matter the fluctuations in price stability and the country’s overall economic growth. 

About the Author

ALENA MAE S. FLORES is a business journalist for nearly two decades having covered the Securities and Exchange Commission, Board of Investments, Telecommunications and Energy beats. She is a former president of the Economic Journalists Association of the Philippines and Best Energy Reporter during the EJAP Journalism Awards in 2010.

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