There is good news on the inflation front.
Consumer prices have slowed for a third straight month with economists expecting further easing in the months ahead.
Core inflation fell to 3.4% year on year in August, dipping from 3.8% in June and 4.2% in June.
While the headlines sound positive, it sure feels like the increase in prices has not slowed down.
On hot days, I used to head to the nearest 7-Eleven outlet to purchase the special weekly S$1 bottled drink such as mineral water, chrysanthemum tea, or 100-Plus.
To my chagrin, these deals have now increased to S$1.20.
You may see it as “only” a S$0.20 increase, but it is a 20% jump from the original S$1.
More instances of rising costs
Rising costs are affecting many aspects of our lives.
Thinking of sending out greeting cards this coming Christmas?
Postage expenses are slated to rise from October 9 as Singapore Post (SGX: S08) increases the postage rate for regular mail from S$0.31 to S$0.51, a 65% jump.
Come December 23, bus and MRT fares will also be rising by between S$0.10 and S$0.11 per journey.
Finally, let’s not forget that the planned increase in the Goods and Services Tax to 9% will take place as scheduled on 1 January 2024 after rising by one percentage point to 8% at the beginning of this year.
Where there is a will, there is a way
It is a fact of life that we must manage these rising expenses as global inflation stays elevated.
Remember that placing your money in bank fixed deposits and treasury bills may feel “safe”, but these instruments are unlikely to beat inflation over the long term.
Instead, you should invest your money in quality stocks to counter these rising costs.
There are several ways to achieve this.
One is to invest in stocks that pay out a yield that exceeds inflation.
The other is to park some money in solid companies that report rising dividends so that you can outpace the rise in prices of goods and services.
For the first option, REITs present a great option.
This asset class pays out a dependable distribution that acts as a reliable source of passive income.
With interest rates surging higher, the distribution yields of many REITs have also risen in tandem, giving you better bang for your buck.
For instance, Mapletree Logistics Trust (SGX: M44U) sports a trailing distribution yield of 5.4% while CapitaLand Ascendas REIT (SGX: A17U), Singapore’s oldest industrial REIT, yields 5.6%.
There are good examples of stocks that recently raised their dividends sharply, helping you to earn a higher level of dividend income even if you own the same number of shares.
DBS Group (SGX: D05) recently hiked its quarterly dividend by 33% year on year to S$0.48 after reporting a stellar set of earnings.
Genting Singapore (SGX: G13), which owns and operates the integrated resort at Resorts World Sentosa, saw its interim dividend jump 50% year-on-year to S$0.015 as border reopenings and increased tourism benefited its top and bottom lines.
Get Smart: Make your money work harder
In line with heightened inflation, two out of three employers look set to offer pay raises to their staff.
This is certainly good news that can help to offset the effects of inflation.
However, remember that you should not just rely on your hard work and salary.
These may not be sufficient to counteract the effects of higher prices in the long run.
You also need to make your money work hard for you.
By allocating money to solid stocks and well-managed REITs, you can not only keep pace with inflation but also build a sound retirement nest egg that can see you through your silver years.
Want to protect your child’s money from inflation? Transform your child’s ‘piggy bank’ into a ‘golden goose’ that keeps giving even until they have grandchildren. Our latest FREE report shows you a stress-free method and 3 superstar stocks that could protect your child’s money from inflation. Click HERE to get a copy of our latest guide.
Disclosure: Royston Yang owns shares of DBS Group.
