What is Inflation? How to seize investment opportunities in an inflationary environment

Inflation, which is also known as 通膨. It refers to the prices continuously going up, making money less valuable. Simply put, the things you can buy with the money in your hands are getting fewer and fewer. Really annoying.

The most commonly used measure of inflation is the CPI, which stands for the Consumer Price Index.

How does Inflation come about?

Inflation is actually just too much money with not enough goods. The inflation in 2025 seems to be mainly caused by these reasons:

• Supply chain issues: Global transportation and production are still a bit constrained.
• Tariff Increase: Trade disputes between countries lead to higher tariffs.
• Everyone is buying, buying, buying: Strong consumer desire
• Central banks are up to something: Their policies are causing market funds to fluctuate.
• People expect things to be more expensive: This expectation has caused prices to pump in advance.

It seems that global core Inflation will reach 3.4% in the second half of 2025. The US tariff policy has played a significant role.

Why can interest rate hikes combat inflation?

Central banks like to use interest rate hikes:

• Borrowing money becomes expensive, so everyone spends less.
• The money circulating in the market has decreased.
• As demand decreases, prices are less likely to pump.
• Money has become valuable.

However, the central bank needs to be careful. If it goes too far, the economy will be doomed.

Does inflation have benefits? Is that true?

A little inflation is actually not bad:

• Stimulate consumption, the economy will grow
• The debtor is happy, as the actual amount repaid has decreased.
• Money won't sit idle; it's all working.

What is the impact of Inflation on the stock market

When inflation is low, the stock market is usually good.

Inflation is high, energy stocks, daily necessities, and those companies that can easily raise prices will be more resilient.

Different investments are affected differently, and adjustments need to be made in a timely manner.

How to invest in an inflationary environment?

Ways to Protect Money in 2025:

1. Typically Inflation-Hedging Assets:

   • Real estate (good location, rentable)
   • Precious metals (gold and silver)
   • Inflation-protected securities ( TIPS )
   • Various goods

2. Don't put all your eggs in one basket:

   • Everyone invests a little globally
   • Invest in strong industries
   • REITs seem to be not bad.
   • Regularly check your investment portfolio and make adjustments.

3. Broaden your perspective:

   • Look for companies that can raise prices with inflation.
   • Prioritize long-term potential

Understand why Inflation occurs, choose the right investment direction, and you can protect your wealth in the Inflation environment of 2025, and even find opportunities.