How to build savings while guarding against inflation and market downturns

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There is little that rattles everyday investors more than a sliding market and inflation that slowly chips away at buying power.

Certified financial planner Douglas Boneparth shares his best advice for easing that anxiety with a smart, long-term investing approach.

A reader from Maryland asks: How do I grow the money I have and hedge against inflation and the next market correction?

DOUG: Two things make investors uneasy about the future: inflation eroding their purchasing power and a market correction suddenly shrinking their portfolio. They may seem like separate threats, but a well-built investment strategy can help address both at once.

First, consider inflation. Historically, one of the strongest long-term defenses against inflation has been owning assets that increase faster than prices. That usually means staying invested in stocks, which have outpaced inflation over long stretches more consistently than almost anything else. Real estate and commodities can also offer some protection, though they come with their own risks and complexities.

Market corrections are different, but they are also a normal part of investing. They tend to happen regularly, they are unpleasant every time, and historically they have been followed by recoveries. The best defense is not trying to jump in and out of the market. That approach is difficult to get right. Instead, investors are better served by a diversified portfolio that fits their time horizon and risk tolerance, so they are not forced to sell at the wrong moment when prices fall.

Both problems point to the same answer: a diversified, long-term investment strategy that you do not abandon when conditions become uncomfortable. Investors who suffer the most during corrections are often the ones who panic. Those who stay invested, and even keep contributing during the decline, usually fare better over time.

If you do not already work with a financial advisor, this may be a good time to think about it. Building a strategy that balances growth and protection depends on your timeline, your income and how you react when the market drops sharply. Those are important conversations to have with someone who can help you create a plan and stick with it.

Tip of the week: Know what enough means for you

When deciding how much to save and how to invest it, the best answers depend on your needs, preferences, temperament and timeline.

It is generally smart advice to save at least enough in a 401(k) to capture your full company match, and ideally more. But the size of your own nest egg depends on personal factors such as when you plan to retire, whether you will have a pension and how much you expect to spend.

So instead of chasing some vague idea of “best,” think about what “enough” means for you and work toward that goal.

And as a bonus, if life already feels complicated, you do not need to master every detail of the market or juggle multiple investing strategies to reach your target. In many cases, a simpler approach can work well, including sticking with a few low-cost index funds that track the market over time.