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Considerations for 2022: Investing Alongside Inflation

While the economy endures periods of market volatility, it’s more important than ever to save for your future and pay attention to budgeting when thinking about you and your family’s situation.

In a recent webinar hosted by Sentinel Group, James Bremis and Ryan Petti walked listeners through how to manage investments amid rising inflation. This article unpacks the insights they shared and tips for managing your finances.

The Landscape of 2022

The economic uncertainty felt at the beginning of 2022 has yet to falter. Amid geopolitical turmoil, energy prices and inflation have risen at an alarming rate. The Federal Reserve is working to raise interest rates in an effort to fight high inflation and slow down the rising prices of goods and services, but this isn’t without consequences.

Bond prices specifically are very sensitive to interest rate changes, and as interest rates go up, bond prices go down. Existing bonds will decline in price to make their comparatively lower interest rate payments more appealing to investors. Higher interest rates make it more expensive to borrow, pushing people to save more. This change in spending habits reduces the amount of money in circulation, which may cool down inflation.

Things to Consider

During times of economic uncertainty, it’s important to remember that market volatility may create opportunities. To take advantage of these opportunities, continue contributing to your savings accounts and start employing these key planning techniques before year end.


Any time you have significant dislocation in the markets like we’ve seen now, your current allocations could be significantly different from the original targets you’ve set. By rebalancing, you put into practice the old investing adage, “Buy low and sell high.” You effectively allocate more money to the positions that are currently discounted by trimming from the positions that have done comparatively well and may have potential gains.

This may be helpful to your overall financial plan if you are a long-term investor who wants to stay in the market but is diligent about monitoring your portfolio. The good thing is if you own Target Date Funds or a risk-based portfolio in your retirement plan, you’re already taking advantage of this. The portfolio manager maintains a target risk tolerance, and when there are fluctuations in the market and you become overly aggressive or conservative as a result, they rebalance you to bring you back to your stated risk exposure.

Tax Loss Harvesting

Over the last few years, investors have generated large capital gains. In turn, they also created high tax potential liabilities outside of their retirement accounts. If you have positions that are down, realizing those losses could potentially offset any gains you realize as well. This works well if you want to access part of your portfolio in the near future, giving you a tax-efficient way to free up some cash for new investment opportunities or to supplement your current income.

Roth Conversions

The hard part of Roth conversions is finding a good time to execute them. If you have cash on the sideline and positions in the market, Roth conversions are a good option, especially if you are uncertain about your prospects in the market over the next few months. Usually they come up when there’s a political shift underway and people want to hedge the risk of higher taxes.

Effectively, you would convert your positions in your pre-tax account to a Roth account to take advantage of the lower tax bill you may have now as a result of the lower prices in your positions. Your cash on hand could be put to work without taking on volatility by paying this year’s tax bill on the conversion, setting you up for potential tax-free future growth.

Budgeting, Debt and Financial Planning

Before you put any financial plan into action, you have to first control your flow of money. With the price of goods increasing faster than wages, it’s important to budget to make sure you can still put money toward different savings goals. Continue saving and buying into markets, and set an annual budget around New Years to then track progress on a monthly basis.

Having a set financial plan will help you reach your goals and keep track of your progress, taking the emotion out of spending. When you monitor your financial goals, you can better choose the investments that will help you meet your goals. And remember, time in the market is more effective than timing the market.

Things to Avoid

While volatile markets offer a lot of valuable opportunities for investors, there are still associated risks that you should try to avoid.

Losing Sight of Long-Term Goals

One year of underperformance in the market shouldn’t derail you if you stay focused on your long-term goals. When your investments feel out of control, focus on controlling what you can. You are more likely to react to changes in the market when you're emotional and you will make adverse decisions as a result. When you have a plan you can trust, emotion takes a backseat and you are able to think more logically about your long-term goals.

Focusing Only on the Future

While it’s important to look toward the future, make sure you don't neglect your short- and medium-term goals in the meantime. Ensure you have a good grasp on budgeting and your levels of debt and don’t spend more than you earn. Have adequate emergency savings and insurance coverage to ensure you’re protected for when life throws curveballs.

Overreacting to Short-Term Market Volatility

When you’re feeling anxious about the state of the market, it’s important that you look back and remember US equities have historically recovered, though past performance does not guarantee future results. History shows bull markets have created far more wealth over time than bear markets have taken away. As a result, you should try not to overreact to the short-term changes in the market.


If you’re feeling uncertain about how to best manage your finances and investments in the current economy, you aren’t alone. Our financial planners are here to help. Contact us for any assistance you need navigating your financial plan, or watch the recording of our recent webinar here.

Financial planning and investment advice are offered through Sentinel Pension Advisors, Inc., an SEC registered investment advisor.

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