Inflation is a portfolio killer, especially when the Federal Reserve is raising interest rates and stocks are tumbling on a regular basis. Certainly, there are conventional ways to manage inflation at the grocery store and at the gas pump. But when it comes to your portfolio, you’ve really got to put on your thinking cap.

In other words, you’ve got to sharpen your trading skills in order to grab the most profits possible when stocks and options give you the chance to do so.

In this report, I’ll give you a set of guidelines you can adapt to both your daily life and your portfolio during inflationary times.

Step #1 – Pay Yourself First

Saving money is difficult during inflationary times as expenses increase. So the best way to approach savings is to save before you pay.

By no means should you avoid your responsibilities to your family and creditors. But even if you put away only $50-100 before you pay anyone else, you’re already getting ahead.

Step #2 – Plan Things Out

As a professional trader, I have a trading plan. I suggest that you create one too, adapting it to your needs to help in the fight against inflation.

Here’s how to create your plan:

• Write it down. This simple principle will keep you grounded. Put your inflation-fighting plan where you can see it and review it regularly.
• Set realistic goals. If you have a small trading account, don’t shoot for the stars. Set up a savings plan that will help you grow your account over time, rather than going broke. And do the “little” things to save money, like walking to the park with your kids and the dog instead of driving.
• Use your goal(s) as your measuring stick. Write down specifics. My favorite trading goal is to make enough money for something specific, such as a car payment. If you’re not making enough money to meet your monthly goal, a careful review is in order. Set a goal for your fight against inflation as well. Maybe fill up your car when it is only half full, instead of waiting for it to be nearly empty.
• Keep excellent records of your trades. This works for both winners and losers. A monthly review of your trades and your results will keep you on the right side of things. This works especially well in concert with paper trades. Keep a good tab of your personal expenses so you know where to make your adjustments next month.
• Adjust your goals and your plans as your situation changes. If you’ve changed jobs and gotten a raise, increase your savings plan. If you are about to get married or have to plan for a child’s education, see where things stand and where you may need to go.

Step #3 – Re-engage With Cash

During bull markets, cash becomes secondary. But when inflation hits and interest rates rise, your money market fund and your savings account will start paying more.

While that may not keep up with inflation now, when things get back to “normal,” you’ll be glad you put that money away and got a higher interest rate payment for it.

Step #4 – Set a Portfolio Loss Limit

The best way to make money is not to lose money. So if inflation is beating the stock market up, consider setting a limit on the amount of money you’re willing to let your portfolio lose.

For example, let’s say you have a $450,000 nest egg and 10 years left until retirement. In this case, it may make sense to reduce your stock holdings if the value of the portfolio drops by a certain percentage, such as 5% to 10%, or maybe even to a dollar figure, such as $425,000. If your portfolio gets close to that red-line value, it’s probably a good time to sell some shares to reduce losses.

By the same token, set up a tight budget for your expenses and stick to it.

Step #5 – Refine Your Stock-Picking Skills

In a real bear market, especially one fueled by inflation and rising interest rates, most stocks will fall in price. Nevertheless, there are some useful stock-picking guidelines that will help you make better decisions.

Stocks with these four characteristics often outperform even in tough markets:

• Strong sales growth: companies that grow their sales 10-20% or better, quarter after quarter
• Strong earnings growth: companies whose earnings meet or beat earnings estimates consistently
• Products that transcend fads: companies whose products are always in demand
• Management that delivers results consistently and shows an excellent ability to navigate rough waters successfully

Step #6 – Reduce Your Exposure to Volatile Investments

Here are some simple, time-tested trading principles to consider during volatile markets — especially those related to higher interest rates:

• Don’t make big bets
• Focus on what’s working in your core portfolio
• Consider pruning your position sizes
• Put any new investment money into a money market fund
• Stay patient

Step #7 – Focus on What’s Working

If you must invest in stocks, look for areas of the market where there is strength.

During times of inflation, money tends to move into the energy sector, especially if there is a supply/demand imbalance in oil and natural gas.

That means energy companies have pricing power. And their pricing power is your tool to fight inflation.

Step #8 – Become a Price Chart Watcher

Tough stock markets are great opportunities to broaden your investing skills. A particularly useful skill is analyzing price charts. That’s because price charts can help you pinpoint trend changes in prices, often before the news hits. The smart money buys or sells quietly ahead of important events.

Let’s get you started by looking at moving averages (MAs). There are three generally accepted MAs on a daily price chart:

• The 20-day MA: smooths out the short-term trend (days)
• The 50-day MA: measures the intermediate-term trend (days to weeks)
• The 200-day MA: catalogs the long-term trend (weeks to months)

Generally, when prices are above a moving average, they are considered to be in an uptrend. The opposite is true when they fall below these key indicators.

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Step #9 – Always Look for the Macro Trends on the Ground

Staying ahead of the investing herd and getting in on the right areas of the market early can help you fight inflation.

For example, the 20th century was all about globalization. And although few are talking about it, thanks to COVID, we are currently seeing a reversal of that trend.

The fact is that globalization is being replaced by a focus on local and regional commerce built around increasing inventories and storage of goods. This is all in case we see more pandemics, wars, geopolitical conflicts, or other events that disrupt commerce.

These events shape prices at the grocery store and at the pump. By keeping up with what’s happening, you’ll have a better way to shape your plans.

Step #10 – Understand How Markets Control Prices

With gasoline prices rising on a nearly daily basis, knowing what’s next will come in handy. And the futures markets can be your guide.

Unlike stock prices, futures prices are actually based on the status of supply and demand for the underlying commodity. Nobody knows supply and demand like futures traders.

Contrary to the widely held view, supply drives futures prices more than demand. In other words, when commodity prices rise, it’s because the markets expect a decrease in supply.

Make it a habit to check commodity prices. That way, you’ll know what lies ahead and can plan accordingly.

Step #11 – Practice Your Trading Craft on Paper

If you trade profitably, you can make money consistently, have more money in your pocket, and manage inflation better.

But getting there may take some practice, which is where paper trading comes in handy. This is pretty simple. You work out your trading method and record your trades on paper, without committing a dime.

Over time, you’ll be able to see what works and what doesn’t. And before you know it, you’ll be doing it for real.

Step #12 – Trade Small

Inflation eats away at your profits. But if you’re making losing trades, it hurts even worse. That’s why trading in small amounts is a good way to fight inflation.

For example, by trading fewer than 100 shares of any company, you’ll reduce your risk of big losses.

Say you bought 500 shares of a $100 stock (ABC), you’re risking $50,000. If that stock fell $10, you’d take a $10,000 paper loss. If you had bought 100 shares and had spread that risk around by buying small lots of five different stocks, odds are that the $10 loss on ABC would have been a lot easier to swallow. Moreover, if the other four stocks went up on that day, then the hit to ABC might not even have been noticeable.

Step #13 – Trade What You Know

This one’s simple, but many investors ignore this tactic and pay the price.

As a physician, I am comfortable with trading healthcare stocks. But I am very specific.

I avoid trading health insurance or hospital stocks because, from my experience, I’ve found there are too many external factors that can make it difficult to discern what’s going on with those companies.

On the other hand, I dive deeply into biotech and pharmaceutical stocks. That’s because, in my daily practice, I prescribe medications and can often gauge how well they work and how those results may affect the stock price of the drug maker.

So if you know your business, put that knowledge to work to fight inflation by making better trades.

Step #14 – Consider Options Strategies

Trading options can be a lifesaver during inflationary times. That’s because:

• Options cost less than stocks
• Options strategies can be tailored to produce income on a steady basis

Specifically, you can generate income by selling options instead of buying them. And that’s what Weekly Cash Machine is all about: generating reliable portfolio income to help you fight inflation.

The plan is everything. So if you approach your fight against inflation as you approach managing your portfolio, the odds will be in your favor over the long term.