IF YOU CAN’T BEAT ‘EM, ‘BUY ‘EM
Mark Lister, 9 September 2022
The rising cost of living is a major issue for many households, with inflation running at the highest levels we’ve seen in more than three decades.
As consumers, there’s not a whole lot we can do about this, aside from working a bit harder on our budgeting and reduce spending where possible.
However, as investors we can hedge our bets, by making sure we own some of those businesses that are taking a bigger than usual share of our expenses.
Frustrated by the supermarket bill? You can buy shares in Woolworths, which the Countdown brand here in New Zealand and is listed on the Australian Stock Exchange.
Power bill getting you down? Take your pick of the biggest electricity retailers, because Mercury, Genesis and the others are all listed on the local sharemarket.
If you’re in Auckland, you can add some Vector shares into the mix and recoup the part of your bill that pays for the distribution network that gets the power to your house.
Sick of watching your mortgage rates go up, and then reading about ANZ or Westpac’s latest bumper profit? All four of the big Aussie banks are listed across the Tasman, so go ahead get a slice of them too.
Telecommunication services is one of the few things that hasn’t risen in price lately, but you can still buy a few shares in Spark or Infratil (which owns half of Vodafone) to offset those costs.
The list goes on.
Whether it’s Netflix or Disney+ subscriptions, which have become a mainstay of our entertainment infrastructure, or the household consumer staples made by the likes of Johnson & Johnson and Procter & Gamble.
We can invest in the businesses that make and sell all these products.
You won’t necessarily feel any better about paying the bills, but it might be a small consolation to know some of the profits will come back your way in the form of dividends.
A company that is increasing prices isn’t necessarily making money, nor is it guaranteed to be a winner. But for those new to investing, looking into businesses you know and understand is usually a good place to start.
That often means the ones we regularly deal with in our own lives. We should have a better understanding of the products they provide, and how resilient demand will be for these.
Companies in the business of necessity can prove to be very good investments too. They tend to be lower risk, more stable during rough patches and more cash generative.
If it feels like you don’t have much choice other than to suck it up and accept a price rise, that probably means the business in question also has strong pricing power.
Investing in companies we shop with also gives us the chance to back those which are providing a great service, looking after their customers, and working hard to do a good job.
These are often the ones that become the most successful, and deliver the best returns to shareholders.
Local government rates and charges have been rising steadily in recent years, but we obviously can’t buy shares in our local council. Based my previous point I’m not sure they’d stack up as a particularly good investment anyway.
We can’t escape high inflation as consumers, but as investors we can do our best to offset (or even benefit from) this.